PETALING JAYA: A senior lecturer has suggested that the authorities limit the use of the “buy now, pay later” (BNPL) scheme to “high-value necessities” that can be considered investments.
Chakrin Utit of Universiti Putra Malaysia’s (UPM) School of Business and Economics said BNPL use should be limited to purchases such as smartphones, personal computers, and home electrical appliances.
“BNPL doesn’t require strict credit checks, which means that many low-income individuals or those with high financial commitments also have access to this facility – thus increasing the risk of their inability to repay their debt,” he told FMT.
“To avoid the misuse of BNPL for small purchases, a minimum purchase limit could be set at RM500 and above.”
The Consumer Credit Oversight Board said last July that the average BNPL transaction value of some 3.7 million BNPL account holders was RM84.
The credit exposure – or total outstanding balance – of the BNPL industry stood at RM1.42 billion at the end of the first quarter of last year (Q1 2024), a 34% increase from the end of 2023. The sum accounted for 0.07% of total household debt as of the end of 2023.
To prevent the BNPL scheme from becoming a “debt trap”, Chakrin said BNPL approval mechanisms should be tightened to ensure that only those who can afford it are given access to the facility.
He said the ease of access to BNPL services and the minimal credit checks meant that BNPL consumers might not fully consider the long-term financial implications of their purchases.
“BNPL credit limits should also be adjusted according to the user’s income level to prevent overspending,” Chakrin added.
“Credit cards should no longer be used to pay off BNPL debt, to prevent users from getting trapped in two different credit systems at the same time.”
Chakrin also suggested that Bank Negara Malaysia (BNM) make it mandatory for BNPL providers to report user credit data to credit monitoring systems such as the Central Credit Reference Information System, to ensure that users do not take on excessive BNPL commitments from multiple providers simultaneously.
He said BNPL charges and penalties should also be more transparent so that users could make decisions based on clear information, and suggested that a cap on interest rates be introduced to prevent users from being excessively charged.
Meanwhile, UPM economist Rahim Samad noted that BNM had taken several steps to prohibit certain individuals from using the facility.
He said such regulatory measures were crucial to ensuring that the BNPL industry would grow sustainably without affecting household financial stability.
