KUALA LUMPUR (Dec 6): Spending has never been easier thanks to buy now, pay later (BNPL) financing, which allows a consumer to pay for their purchase a month later or split the payments into instalments. It has also opened up an avenue to credit for those who previously did not have access to such facilities.

A conservative consumer may frown upon such credit schemes, as they encourage the accumulation of debt, but it looks like BNPL financing is here to stay. In markets where such a facility is more mature, like in the US where it is a US$100 billion (RM411.1 billion) industry (and growing), more than 90 million users are tapping into these schemes for interest-free instalments.

Here in Malaysia, BNPL players are still very much in the nascent stage despite the traction gained during the Covid-19 pandemic. The scheme’s rising popularity among consumers, however, even has several conventional and digital banks jumping on the bandwagon to make it part of their product offerings.

Statistics by the Consumer Credit Oversight Board task force, which is spearheaded by the Ministry of Finance, Bank Negara Malaysia and the Securities Commission Malaysia, reveal that the total BNPL outstanding balance amounted to RM4.2 billion at end-September. While it may look like a drop in the ocean compared to the total household debt of RM1.6 trillion, its exploding growth was enough to draw the regulator’s attention.

In a separate story, we also look into the business model of the BNPL players. How do the BNPL players generate revenue if most consumers utilise the interest-free instalment period for payments? How does BNPL fund the business? How do they manage credit risk?

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