BNPL first step to next Financial Collapse? ( Buy Now, Pay Later)
We’ve all seen the trend of BNPL rising quickly. As a matter fact, it actually started off early in the 19th century but was popularised again recently post pandemic Covid-19. Currently in Malaysia we have about 8+ BNPL companies and rising as the days goes by.
In my view, whoever that introduced it again is doing it to slowly cause the next financial collapse. In simple terms, there isn’t enough purchasing power for the people to sustain with their daily lives what more for our fancy spending. Gone are the days when we can purchase noodle soup for RM1, candies for RM0.05, bus rides for RM0.30.
Only recently on 4th August, 2022 that the Council for Consumer Credit issued a public paper to consolidate all consumer credit activities under its umbrella. There will be 3 Phases of this initiative, Licensing, Regulating and Observing how the ecosystem evolves and develops.
Hopefully this initiative will have a NET positive impact on the economy as usually when intervention happens, the growth of that specific industry would slowly deteriorate as the potential opportunities would dampen.
So, instead of waiting for their paycheck, why not buy it and pay in installments with 0% interest?
Ding! Ding! Ding! That’s when everyone started doing it and more and more non-bank entities are following suit the trend.
The weakening of the Ringgit as well did not help out the population in our country. In addition, with no regulation yet for BNPL, that might cause further downfall to the population if no stop measures are put in place.
So, should use or not?
As a Consumer (Public)
You can basically use any of the above BNPL services actually SO LONG as you pay on time, non of the penalties matters.
However, if you fear the risk of missed payments, I would advice for you to use Split or GrabPayLater due to their low penalties.
Becareful of Shopee, Favepay and IOU Pay since their charges on late payment penalty fees are % based which means it will be big amount; if you miss payment.
If you pay on time, it functions the same as Public Bank Credit Card or Maybank Credit Card for that 0% installment plan.
Compared to the 2 cards, some BNPL might not be accepted everywhere compared to the Credit card coverage.
As a Merchant/Business Owner
To maximize profits, for sure you would ensure that your product/services have some form of BNPL since it would encourage spending.
Shopee, Lazada, Grab already have the benefits of that, whereby the platform will take accountability of the risk and pay as usual to Merchants.
These platforms basically act as “Banks” to offer installments services to the customers.
So Everybody Wins Right?
Imagine this scenario below:-
>Customer Alice have 2 Credit Cards which are Maxed. (RM5k, RM15k)
>Alice still wants to spend but does not have the cashflow, so she uses BNPL.
>Since there is no regulation, Alice uses ShopeePayLater to approve payment for her new shoes.
>Alice repeats the process using Atome, Split, Hoolah, IOUPay.
>Since most BNPL I assume do not work together to cross check how much BNPL & Debts outstanding the person have, that might trigger another financial meltdown.
>Can you see where I’m getting at?
Biggest Loser?
Sad to say that the biggest loser currently are Banks. Why?
BNPL approval is almost instantaneous within seconds upon verification of identification.
Banks? Credit Scoring, Regulation, Approvals, and more.
However, for those banks that could not wait, Guess what they did?
If you cant win them, BUY THEM.
More and more banks are buying out BNPL companies, since its speed to market and its better to reap the rewards immediately rather than to build and wait for regulation to happen.
By then, it might be too late and it would be too saturated already.
Thanks for reading!
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PS: Took me about 2 days to research & gather my thoughts for this article.
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