BNPL Transactions in Malaysia Surge to RM7.1 Billion, Sparking Concerns Over Rising Debt Risk

Consumer transactions under the ‘Buy Now, Pay Later’ (BNPL) scheme have seen a sharp increase in Malaysia, reaching RM7.1 billion in the second half of 2024 compared to RM4.9 billion in the first half of the same year. This significant jump highlights the growing reliance on alternative payment methods as Malaysians navigate rising living costs.

With BNPL services gaining popularity, many consumers have embraced this flexible payment option that allows purchases to be split into manageable monthly installments. Some BNPL providers offer repayment periods of up to six months, while others provide shorter three-month terms.

As of December 2024, data from Second Finance Minister Datuk Seri Amir Hamzah Azizan revealed that there are now 5.1 million active BNPL users, with most being individuals aged 21 to 45 earning less than RM5,000 per month. Currently, 12 companies are offering BNPL services in Malaysia, further driving its adoption.

Despite the convenience, concerns have emerged regarding the potential rise in household debt. As of the same period, BNPL loans amounted to RM2.8 billion, representing 0.2% of Malaysia’s total household debt. Although this figure appears manageable, the growing trend has sparked debates about future financial risks, particularly for younger users.

In response to these concerns, the Ministry of Finance introduced the Consumer Credit Act Bill on 4 March 2024. This bill aims to establish a regulatory framework that will oversee BNPL providers, ensuring they adhere to ethical practices such as transparent fee structures, fair credit terms, and regular repayment reminders. If passed, the newly proposed Consumer Credit Commission (CCC) will monitor BNPL providers under the Ministry of Finance’s supervision.

Public reactions to BNPL services have been mixed. While some consumers praise BNPL for offering financial flexibility during festive seasons like Hari Raya, others worry about the growing debt risks. A Facebook user highlighted how BNPL helped manage expenses during Ramadan, easing the burden of immediate full payments.

On the other hand, financial experts have warned that without proper regulations, BNPL services could significantly contribute to bankruptcy rates among young adults aged 23 to 40. Concerns have also been raised about individuals accumulating multiple BNPL debts, potentially worsening their financial stability.

As Malaysia continues to embrace digital financial solutions, both consumers and regulators must strike a balance between convenience and responsible borrowing to prevent future financial pitfalls.

Source : Google