KUALA LUMPUR: Providers of "Buy Now, Pay Later" (BNPL) consumer credit services generated RM6.2 billion in sales last year and with the number growing, it is raising concerns of bloated household debt.
Khazanah Research Institute (KRI) has called for more stringent regulations and monitoring to reduce the impact that BNPL may pose on the economy, particularly household debt.
Household debt currently accounts for over 84 per cent of the country's gross domestic product, according to KRI.
While the present situation is not alarming, Consumer Credit Oversight Board (CCOB) task force deputy head Azryta Abdul Aziz said it was crucial to monitor the BNPL growth as it could spiral out of control.
"So far, the government has established the Consumer Credit Act to protect credit consumers and to promote a fair, efficient and transparent credit industry by ensuring proper conduct and responsible lending practices among credit providers," she said in a KRI webinar yesterday.
Azryta said the BNPL industry recorded a steady double-digit growth across quarters with 77.3 million transactions worth RM6.2 billion in 2023.
The trend continued in the first quarter of this year with the total credit extended at RM1.4 billion, driven by increased demand and familiarity with its usage.
She added that as much as 3.7 million people in Malaysia were using BNPL, with the majority being working adults aged 21 to 45 years old.
At the same time, 700,000 merchants are accepting BNPL payments, with a strong presence in the transportation, retail, food and restaurant sectors."In terms of the non-banks, we want to ensure those who are providing credit are fit and proper entities," she said.
"Beyond a certain threshold, we also require credit providers to perform affordability assessment to ensure the person could actually commit to future obligations without causing undue financial stress," she said.
KRI senior research associate Shereen Hazirah Hishamudin highlighted the economic implications of BNPL, including the rising household debt, changes in the credit market and influence on savings rate.
"At the moment, BNPL represents a small proportion of household debt.
But globally, BNPL has raised concerns about responsible lending practices and potential risks associated with extensions of credit to the less literate population," she said.
While competition between BNPL against traditional banks and credit card providers has led to a more vibrant and diverse credit market, Shereen said there was a risk that traditional banks might engage in riskier lending practices to maintain market share, potentially leading to financing instability.
She added that the growth of BNPL could also influence the dynamics of consumer credit, and impact monetary policy transmission mechanisms.
