THERE must be a body that regulates the “Buy Now Pay Later” scheme as consumers are at risk of becoming bankrupt should the easy payment method not be monitored by relevant authorities, a consumer group and financial expert said. 

They told The Malaysian Insight that the government should look into the matter seriously and not just allow certain companies offering the BNPL scheme to run its business unmonitored.

Although the scheme gives consumers easy access to cash for new purchases, it can also quickly turn into financial trouble. 

BNPL is a type of short-term financing scheme that enables a consumer to buy an item and pay for it at a future date. 

It is structured as an instalment plan or a money-lending facility involving the consumer, a financier and the merchants from whom the purchases are made. 

Federation of Malaysian Consumers Associations senior manager Baskaran Sithamparam is worried about the current scenario where many youth are entrapped in the scheme. 

He said as of 2018, the numbers of bankruptcy involving those aged below 35 were already high and these BNPL schemes could result in more young working adults suffering financially without regulation. 

“The government has to look into this seriously. There needs to be a body that regulates the system. At the moment, the interest rate is extremely high and the penalty for paying late is extremely brutal. 

“If we allow this to continue, I worry many of our younger generation will fall into debt and subsequently go bankrupt. Even those blacklisted can purchase items using BNPL apps, this is not good and is not advisable.” 

In Malaysia, the basic requirements for BNPL schemes are that one only has to be a Malaysian citizen, is above the age of 18, and has a debit card, a phone number and an email address. Consumers can then easily enjoy the purchase of a product.

It has been estimated that with late charges the consumer would pay more for the product than if they had been charged interest. Late payment fees may vary between a fixed payment to a percentage of the outstanding payment.

Even before BNPL schemes research findings had shown that 68% of Malaysians believed they had not saved enough, 52% indicated that they would have difficulty raising RM1,000 to face an emergency and 47% admitted being excessively over-indebted. BNPL could result in making this situation worse. 

Agreeing with Baskaran is Assoc Prof Dr Ahmed Razman Abdul Latiff from Putra Business School.

The academic said without regulation, many consumers will go into debt and may not be able to pay off in time as they already have other commitment such as car or housing loan payments. 

“This scheme is a phenomenon nowadays. Everyone has at least one BNPL app. Globally in 2021 there were 400 million users but last year, there were 1.5 billion users. Imagine how fast it grew. 

“Hence we are all in debt. Although the name suggests otherwise, we are actually in debt. The interest rate is high. Plus, many young working adults have their own loans, such as hire purchase or housing loans and some education. These are loans that need to be paid on time. 

“If they are racking up more loans by using these apps, how can they stay committed? We need to remember that our salaries do not increase monthly, how do we keep our savings when we do not have enough money to pay our monthly commitments?” the academic asked. 

Use app wisely 

For Dyana Amin, 32, the BNPL app should only be used on important items and not necessarily to feed one’s wants. 

The mother of three said she would only use the app on important matters such as on Hari Raya. 

“We need self-control. I know that is hard but we can control ourselves. Like myself, I would use the app to buy two items in two months. Once I pay off the two items I would not use it until there is a need. 

“Then I would use it to buy Raya clothes. Instead of spending hundreds on your baju raya, you can use the app to pay half of the price and then pay the rest in two months’ time. The key is to be wise. Even if there is regulation, but you spend your money freely, you’ll end up in trouble,” she said.  

Marketing executive Nik Haizal Muhd Kamil was once a user of a BNPL app but has stopped using the scheme early this year. 

“I do not want to use it anymore. One time, I forgot to make the payment only to realise it a day later, and I was fine. Although it was my mistake, I do not want to repeat it. The scheme is actually fun to use but once you slip up, the penalty is heavy,” he added.

However, he agreed that it is all up to self-control.  

“You have to know your limits and your own financial status. You cannot spend RM1,000 on a branded cap or a t-shirt only to pay it in three months. You are causing trouble for yourself,” he added. – February 20, 2023.