Getting and using Buy Now, Pay Later (BNPL) services is much easier and simpler than using credit cards because there are no strict regulations set by the government. Anyone over the age of 18 can start using BNPL today, even if you are unemployed and this will lead to many problems if left unchecked. This is why Bank Negara Malaysia (BNM) has started taking some measures.
BNM is working with the appropriate agencies, including public education, to address concerns that BNPL plans may encourage customers to spend more than they can afford.
The BNPL sector is unregulated despite its exponential expansion, with market analysts projecting a transaction volume of over RM2 billion this year alone. The pandemic played a major role in the scheme’s expansion as Covid-19 limits prompted consumers to purchase online and look for deals.
In response to questions from Malay Mail, the bank responded:
Although BNPL schemes typically allow customers to make payments for purchases in installments at zero interest, consumers need to be aware that there may be other charges levied (eg processing fees and late payment fees).
In some cases, the total charges levied by BNPL providers on the customers may be higher than the total interest and charges imposed by traditional lenders for products such as credit cards.Bank Negara Malaysia
BNPL services provided by non-bank operators are not currently regulated by BNM or another regulatory body.
However, the regulator pointed out that the Ministry of Finance and the Securities Commission are presently leading inter-agency efforts to pass the Consumer Credit Act (CCA) in 2022, which will also involve the creation of the Consumer Credit Oversight Board (CCOB).
The CCOB will eventually serve as the sole conduct authority for all consumer credit activities, starting with those offered by credit providers that are currently unregulated by any authority, such as BNPL schemes offered by non-bank operators.Bank Negara Malaysia
Nearly a dozen BNPL service providers are now active in the Malaysian market, and more are anticipated to follow. Banks and other traditional credit providers are reportedly already working on creating their own BNPL schemes and may soon join the competition, according to market observers.
Following claims that many of its key participants have ramped up significant debt, regulators in wealthier economies have become more interested in the BNPL industry.
In order to reduce the risk of BNPL being offered to consumers who are unable to repay, BNM stated that with the CCA’s passage, non-bank BNPL providers will be subject to the proper regulatory standards, including responsible lending practises.
These service providers will also be held to standards for Shariah compliance, risk management, and consumer protection.
Banking institutions are obliged to follow procedures that are compliant with the current responsible lending criteria for BNPL schemes offered by or in collaboration with banking institutions.
For the time being, the central bank has recommended users of BNPL plans to use prudence and make knowledgeable choices, paying close attention to the terms and conditions, particularly when it comes to fees and charges.
Additionally, users are urged to track their BNPL commitments so that debts can be effectively handled while paying the payments in full and on time to avoid penalties.
The bank cautioned if the users are not careful, the debts can mount up quickly.
If you want to learn more about BNPLs in Malaysia, you can go right here.