Ramadhan isn’t just about fasting and spiritual reflection—it’s also a season of preparation. As the days pass, the excitement for Eidul Fitr builds up, and with it comes the annual shopping spree. New clothes, home decorations, festive treats—Malaysians know how to celebrate in style.
Walk into any shopping mall or scroll through your favorite
online store, and you’ll see the telltale signs of Raya fever: massive
discounts, “last-minute sale” banners, and, of course, the ever-tempting Buy
Now, Pay Later (BNPL) options flashing across your screen.
It’s easy to get carried away. After all, it’s Raya—a time
of joy, family, and looking your best. But here’s the question: Are we truly
celebrating within our means, or are we unknowingly setting ourselves up for
post-Raya financial regret?
The Origins of BNPL
The concept of purchasing goods and deferring payment isn't
new. In the 19th century, installment plans emerged, allowing consumers to
acquire expensive items like furniture and farm equipment by paying over time.
For instance, Singer Sewing Machines pioneered this approach in the 1850s with
their "dollar down, dollar a week" plan, making sewing machines more
accessible to the average household.
Similarly, layaway programs became popular in the early 20th
century. These programs enabled customers to reserve products by making a
deposit and paying the remaining balance over time before taking the items
home. This method was especially prevalent during the Great Depression, as it
allowed consumers to manage their finances without incurring debt.
The Digital Transformation
With the advent of the internet and e-commerce in the late
20th and early 21st centuries, traditional installment plans evolved into the
BNPL services we recognize today. Fintech companies began integrating these
services directly into online shopping platforms, offering instant credit
approvals and flexible payment options at checkout.
Key Milestones in Modern BNPL
- Afterpay: Founded in Australia in 2014 by Nick Molnar and Anthony Eisen, Afterpay quickly gained traction by allowing consumers to split purchases into four interest-free installments. Its success led to a significant acquisition by Block, Inc. (formerly Square) in 2021.
- Affirm: Established in 2012 by Max Levchin, a PayPal co-founder, Affirm positioned itself as a transparent alternative to credit cards, offering clear terms and no hidden fees.
- Klarna: Launched in Sweden in 2005, Klarna expanded its services over the years to include BNPL options, becoming one of Europe's largest banks and a leading payment solutions provider.
Grab's Entry into BNPL
While Grab, Southeast Asia's leading super app, has made
significant strides in the BNPL space, it wasn't the pioneer of the concept.
Grab introduced its BNPL service, PayLater, in 2019, initially rolling it out
in Singapore and later expanding to other markets, including Malaysia. PayLater
allows users to consolidate their Grab transactions and settle the total amount
at the end of the month or split payments into installments, providing
flexibility and convenience.
Understanding the evolution of BNPL—from 19th-century
installment plans to today's digital platforms—highlights its enduring appeal
and adaptability. While companies like Grab have innovated within this space,
the foundational principles of BNPL trace back over a century, emphasizing
consumers' desire for flexible payment options.
Absolutely, buddy. Let's delve into the current state of Buy
Now, Pay Later (BNPL) services in Malaysia, focusing on debt growth and the
factors contributing to its widespread adoption.
BNPL Usage and Debt Statistics in Malaysia
- Transaction Volume and Value: In 2023, BNPL services in Malaysia processed approximately 77.3 million transactions, amounting to RM6.2 billion (US$1.38 billion).
- User Demographics: There are about 2.9 million active BNPL users in Malaysia. Notably, 44% of these users are aged between 21 and 30, while 47% are between 31 and 45, indicating a significant uptake among younger adults.
- Overdue Payments: As of the end of September 2023, overdue payments for BNPL services stood at 4%, with 1.3% of users missing payments for more than three months.
Factors Contributing to the Widespread Adoption of BNPL
1. Ease of Access: BNPL services offer a simplified
application process without stringent credit checks, making them accessible to
a broader audience, including those who may not qualify for traditional credit.
2. Interest-Free Installments: The allure of splitting
payments into interest-free installments appeals to consumers looking to manage
their cash flow without incurring additional costs.
3. Digital Integration: Seamless integration with
e-commerce platforms and mobile applications provides a convenient checkout
experience, encouraging impulsive purchases.
4. Pandemic Influence: The COVID-19 pandemic accelerated
the shift towards online shopping and digital payments, with BNPL emerging as a
popular payment method during this period.
5. Targeted Demographics: BNPL services often appeal to younger, tech-savvy consumers who may lack financial literacy, increasing the risk of accumulating debt beyond their means.
Concerns and Regulatory Responses
- Debt Accumulation: The ease of access to BNPL services may lead to overconsumption and financial overextension among consumers, particularly younger demographics.
- Lack of Regulation: As of 2023, BNPL services in Malaysia operate in a legal grey area, lacking specific regulatory oversight, which raises concerns about consumer protection.
- Regulatory Initiatives: Bank Negara Malaysia has proposed stricter regulations requiring BNPL providers to assess borrowers' ability to repay before approving loans, aiming to mitigate potential debt risks.
While BNPL services offer convenient payment options, their
rapid growth in Malaysia has led to concerns about increasing debt,
particularly among younger consumers. Factors such as ease of access,
interest-free installments, and digital integration have contributed to their
widespread adoption. However, the lack of regulation poses risks, prompting
authorities to consider measures to protect consumers and ensure responsible
lending practices.
Staying Smart with BNPL: How to Use It Without Regret
By now, it's clear that BNPL is not going away anytime
soon. For many, it's a lifeline—whether to spread out costs for essentials or
manage cash flow in tough times. But let’s be real: BNPL is a double-edged
sword. Use it wisely, and it works in your favor. Use it recklessly, and it
can wreck your finances.
So, what can you do if avoiding BNPL isn’t an option?
Here’s how to stay in control and not let it take control.
1. Treat BNPL Like a Credit Card (Without the Perks)
BNPL makes spending easy—too easy. The danger? It doesn't
feel like debt. Unlike credit cards, BNPL doesn't build your credit score, but
it can still lead to financial stress if you miss payments. Before using
BNPL, ask yourself: Would I swipe my credit card for this? If the answer is
no, it’s probably not worth the commitment.
2. Only Use BNPL for Essentials or Planned Purchases
If BNPL is necessary, use it wisely. Essentials like
groceries, work equipment, or school fees? Maybe. A last-minute shopping
spree for that fourth Raya outfit? Big no. If it wasn’t in your budget
before BNPL, don’t let BNPL magically make it affordable.
3. Don’t Stack BNPL Purchases
One BNPL payment plan? Manageable. But stacking multiple purchases across different providers? That’s a ticking time bomb. What feels like “small payments” today can snowball into a massive monthly commitment. Know your total BNPL obligations before checking out.
4. Avoid “Interest-Free” Deception
BNPL is often marketed as zero-interest, but don’t be fooled—there’s always a catch. Late payment fees, hidden charges, or even penalties for missing payments can turn an “interest-free” purchase into a financial nightmare. Read the fine print and set reminders for due dates.
5. Use BNPL Like a Budgeting Tool, Not Free Money
The key to using BNPL without regret? Make sure you can
afford the full price upfront. If you must use BNPL, pretend it’s a
budgeting tool: allocate money for each installment in advance so you don’t
struggle when the bill comes.
6. Automate Payments to Avoid Late Fees
Late fees are where many BNPL users get caught. One missed
payment, and suddenly, what seemed like a good deal becomes more expensive
than using a credit card. If possible, set up auto-payment so you never miss
a deadline.
7. Know When to Walk Away
If you find yourself relying on BNPL to get through the
month, it's time to take a step back. BNPL should complement your finances,
not replace them. If you’re struggling to keep up with payments, prioritize
clearing BNPL debt first before committing to new purchases.
Final Thoughts: Use It, But Don’t Abuse It
BNPL isn’t inherently bad—it’s how we use it that determines whether it’s a blessing or a burden. The trick is discipline. Use it as a temporary financial tool, not a way to live beyond your means. Because at the end of the day, there’s no “Buy Now, Pay Never.” The bill will come. The only question is: Will you be ready for it?