12-5-2024 (KUALA LUMPUR) Arif, a lift technician, found himself in financial strain after succumbing to the allure of “buy now, pay later” (BNPL) schemes, a trend echoing across Malaysia. The ease of splitting purchases into smaller instalments enticed him to indulge in unnecessary buys, ranging from shoes to watches, accumulating unused items and mounting pressure to meet payments.
Reflecting Arif’s predicament, a staggering 2.9 million active BNPL users populate Malaysia, as per data from the Consumer Credit Oversight Board (CCOB). However, concerns escalate as overdue payments hit four per cent, with 1.3 per cent defaulting beyond three months, amounting to RM0.9 billion in unpaid transactions.
While BNPL debts pale compared to credit card debts, the impending rise of BNPL services prompts governmental action. Authorities are drafting the Consumer Credit Act to regulate the uncontrolled BNPL sector, expected to be tabled in parliament later this year.
Financial literacy experts commend this move, emphasizing the deceptive ease of BNPL services, which foster a false sense of purchasing power and propel excessive spending. Economist advocates anticipate robust consumer protection measures within the proposed legislation.
The CCOB, spearheaded by the finance ministry, Bank Negara Malaysia (BNM), and the Securities Commission, monitors BNPL proliferation. Data reveals a staggering 52 million transactions worth RM4.3 billion from January to September last year, reflecting double-digit growth across quarters.
Despite BNPL’s convenience, financial experts caution against its pitfalls. Faiz Azmi denounces BNPL as a gateway to irresponsible lending, highlighting its absence from current debt-monitoring systems, potentially masking borrowers’ true financial obligations.
As BNPL usage skyrockets, concerns mount over its impact on vulnerable demographics. Bank Negara Malaysia highlights that over 80 per cent of BNPL users earn less than RM3,000 monthly, predisposing them to financial stress and over-indebtedness.
With the impending Credit Consumer Act, BNPL providers will be subject to prudential and conduct standards, ensuring fair and responsible lending practices. The legislation aims to protect consumers from over-indebtedness, especially among younger and lower-income brackets.
BNPL providers like Shopee, Grab, and Atome dominate the Malaysian market, constituting 97 per cent of all transactions. Alain Yee, from SeaMoney and ShopeePay Malaysia, emphasises responsible lending practices, including tailored credit limits and proactive user guidance.
However, concerns persist as BNPL’s accessibility facilitates impulsive spending. Nirmala Supramaniam of the Credit Counseling and Debt Management Agency (AKPK) deems BNPL’s convenience a double-edged sword, warning against overspending, especially among young consumers.
