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Singapore’s top central banker has fielded parliamentary questions on the country’s buy now, pay later (BNPL) regulations, in an effort to assure lawmakers that users are protected from data risks and over-indebtedness.
At the same time that Experian was named as the operator of Singapore’s BNPL bureau, lawmakers asked for greater clarity as to whether BNPL data will be included in regular consumer credit reports.
Tharman Shanmugaratnam, senior minister and chair of the central bank (MAS), responded by clarifying that Singapore has separate data-sharing systems in place for different tiers of financial service providers.
As Shanmugaratnam pointed out, financial institutions (FIs) such as banks and non-bank credit card issuers are subject to different rules than non-FI entities such as licensed money lenders or BNPL providers.
“This is in part a reflection of market realities,” he said.
In Singapore, about 98 percent of all household credit is provided by FIs, while only 2 percent is split between a range of non-FI lenders, including BNPL providers.
According to Shanmugaratnam, last year BNPL accounted for about 0.5 percent of all debit and credit card transactions in Singapore.
“As loans from FIs account for the vast majority of consumer borrowings, FIs are likely to gain only marginal additional consumer credit insights [from sharing data with non-FIs],” he said.
“We have therefore not currently compelled FIs and non-FI lenders to set up a common consumer credit sharing process.”
When it comes to over-indebtedness, Shanmugaratnam argued that Singapore’s current rules for FIs, combined with the BNPL Code of Conduct, offer adequate protections for both consumers and the wider BNPL industry.
Launched last month, the BNPL Code limits the risk of over-indebtedness through self-regulation measures to which BNPL providers agree to uphold.
As reported by VIXIO, the BNPL Code formalises safeguards such as suspension of account on default, no compounding interest or fees and a commitment not to initiate bankruptcy proceedings against their customers.
It also caps BNPL debt per customer at no more than S$2,000 (US$1,427) per provider at any given time, unless the customer completes an additional credit assessment.
According to Shanmugaratnam, “this limits further the benefits of a common credit bureau for FIs and BNPL providers".
“In addition,” he added, “where consumers make use of credit cards to make payment for their BNPL transactions, existing unsecured credit rules, such as caps on FI-borrowings, would further mitigate the risk of consumer over-indebtedness.”
Nevertheless, Shanmugaratnam said he believes “there are benefits” to setting up a BNPL credit bureau to facilitate data sharing between BNPL providers.
Last week, as reported by VIXIO, Experian was appointed as the operator of the Singapore BNPL bureau by the Singapore FinTech Association (SFA).
The appointment means that Experian will provide the technical infrastructure to facilitate credit information sharing between all accredited BNPL providers in Singapore.
As per the BNPL Code, this will include data on outstanding balances, missed payments, delinquencies and other personal identifying information.
Experian, which already acts as the BNPL bureau operator in both the US and UK, said it is confident that Singapore has in place a strong framework for self-regulation of the BNPL industry based on the BNPL Code.
“Advocating for consumer affordability has always been at the core of our business and we are looking forward to working closely with SFA to tackle the issue of credit stacking among BNPL users,” said Kabir Khanna, general manager of Experian Credit Services Singapore.
“Along with the BNPL Code of Conduct, we believe that this will safeguard our consumers against credit risks and foster greater trust and transparency between BNPL providers and the customers they serve.”
In the near future, Experian said it plans to roll out a series of “knowledge sharing engagements” for all accredited BNPL players in Singapore.
This will build on the best practices established by Experian’s work as BNPL bureau operator in the US and UK.
