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Buy now, pay later (BNPL) products' success in the region has prompted the Monetary Authority of Singapore (MAS) to act faster than originally anticipated, with consumers using the payment method to be under stricter rules.
Singapore’s finance minister has confirmed to parliamentarians that the Singapore FinTech Association will have developed its code of conduct for BNPL providers by the end of this year.
Tharman Shanmugaratnam, who is responsible for the MAS, said that the BNPL Code will limit the extent of debt accumulation by consumers.
Measures under consideration include suspending users from making further BNPL purchases once a payment is overdue, not charging compounding interest on outstanding amounts and requiring a user creditworthiness assessment before the user can exceed a stipulated credit cap with a BNPL provider.
BNPL providers are also exploring sharing with one another information on customers’ outstanding amounts and delinquency status to facilitate better assessments of their customers’ creditworthiness.
The move to impose oversight on BNPL is a change of tune from statements that Shanmugaratnam made in November last year.
The regulator then said that “BNPL schemes do not pose significant risk to household indebtedness. They are not yet widely used relative to other payment methods.”
It has now been revealed that BNPL transactions in the country amounted to S$440m last year, according to Shanmugaratnam, up from S$114m in 2020.
“However, BNPL transactions remain very small compared to other means of consumer payment,” he said. For example, they represented less than 1 percent of total credit card and debit card payments made last year.
Some of the largest BNPL providers in the region include Atome and Hoolah, both of which are headquartered in the city-state. They have seen rapid expansion across South East Asia and Chinese territories.
The MAS’ announcement comes after the Consumers Association of Singapore stated that it wanted more protection for BNPL users, after receiving 18 complaints over a period of 18 months.
The consumer association further warned that BNPL services may lead to consumers spending beyond their means and making impulsive purchases, due to a false perception of increased purchasing power, with its president Melvin Yong recommending that “limits should be set on both consumers and BNPL providers”.
Singapore is not the only country in the region that is tightening BNPL supervision. Malaysia, for example, announced in August that its Consumer Credit Act, which is due to be passed at the end of this year, will regulate BNPL products.
