KUALA LUMPUR (March 29): Buy-now-pay-later (BNPL) schemes, which grew at a more moderate pace in 2022 amid tapering customer demand, continued to target segments of Malaysian households, with the majority of users being younger and lower-income borrowers.

About 44% of BNPL users are aged between 18 and 30 years old.

More than 80% of BNPL users earn less than RM3,000 a month, and therefore are more susceptible to financial stress.

“The relatively easier access to BNPL facilities may place users at higher risk of spending beyond their means, without considering their ability to promptly repay the full loan amounts,” BNM said in the Economic and Monetary Review and Financial Stability Review 2022 reports on Wednesday (March 29).

Given the lack of transparency over fees and charges, particularly late payment charges and processing fees imposed under these schemes, users may also be unaware of the total amounts that they must repay.

Anecdotal evidence among selected larger BNPL players point to an increasing trend in missed repayments, suggesting that such risk may be rising.

Share of BNPL users with overdue payments in the fourth quarter of 2022 (4Q2022) was at 17%, compared with 14% in 2Q2022, and 7% in 4Q2021.

The central bank added that financial stability risks associated with BNPL schemes remained limited, as BNPL exposures accounted for only 0.05% of total household debt.

“Nevertheless, the bank is cognisant of the conduct risks that BNPL poses to consumers, and has taken steps to mitigate this for BNPL schemes offered by entities that are regulated by the bank,” BNM said.

This includes requiring licensed financial institutions (banks and prescribed development financial institutions) and approved e-money issuers to adhere to existing responsible lending standards for the BNPL schemes offered.

The Ministry of Finance, the central bank and the Securities Commission Malaysia remain committed to expediting the tabling of the proposed Consumer Credit Act, according to the report.

“Once enacted, non-bank credit providers such as BNPL providers will be required to comply with relevant prudential and conduct standards.

“Apart from promoting a level playing field between banks and non-bank BNPL providers, these ongoing efforts aim to accord the same level of protection to financial consumers in relation to BNPL schemes, regardless of which providers they deal with,” said BNM.

These efforts will also help to mitigate risks from over-indebtedness building up among younger and lower-income borrowers, it added. 

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