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Singapore’s finance minister told parliamentarians it does not hold data on the use of buy now, pay later (BNPL) products, but referred to the new industry code for the product as the solution for its riskier elements.
Melvin Yong Yik Chiye, a member of the Singaporean parliament, asked whether the Monetary Authority of Singapore (MAS) has data on how prevalent the use of BNPL services is among those aged below 21 years old in the past three years.
The MP, who sits with the governing People’s Action Party, also probed the government on whether there have been cases thus far of young users being unable to repay their debts incurred via BNPL services and what the consequences have been in these circumstances.
“BNPL service providers do not, as a market practice, open accounts for users under 18 years of age,” said Tharman Shanmugaratnam, the minister responsible for MAS. “As for BNPL users aged 18 to 21, MAS does not have customer and default data.”
The existing features of BNPL schemes limit the extent of debt accumulation and the impact of a default for all users, including those below 21 years old, he added.
The minister also spoke of the benefits of the country’s new BNPL code, which was launched in October by the Singapore Fintech Association, alongside local market players such as Atome, Grab Financial Group and ShopBack.
BNPL Code Of Conduct
Among the rules stipulated by the code are creditworthiness standards. Through this, each BNPL provider will permit customers to accumulate no more than SG$2,000 (US$1,427) in outstanding payments at any given time, unless they complete an additional credit assessment.
This additional credit assessment must consider, among other details, customer income information and customer credit information shared across all BNPL firms.
BNPL providers will also suspend a consumer’s access and use of its BNPL services upon their failure to meet any payment obligations.
BNPL providers will also need to cap all fees, including late fees and other charges. Any fees and interest charged must also not be compounded.
Meanwhile, all fees and fee-related structures will need to be communicated in a manner that is clear and transparent to customers, while consumers are also entitled to make full repayment with BNPL providers at any time, without early repayment fees.
BNPL providers have to ensure that consumers have access to account statements consolidating the total outstanding balance of purchases made through the respective BNPL provider.
“MAS will monitor the industry’s implementation of the safeguards set out in the BNPL Code and continue to work with the industry to mitigate the risk of consumer over-indebtedness,” said Shanmugaratnam.
The new code of conduct also calls for BNPL providers to ensure that advertisements of products and services comply with the relevant advertising codes, that users can voluntarily exclude themselves from BNPL services and promotional materials.
Meanwhile, BNPL providers will consider extending hardship assistance to consumers facing financial hardships to work out a mutually acceptable payment arrangement with them.
During this time, BNPL providers will not allow any further transactions. BNPL providers commit not to initiate bankruptcy proceedings against their customers.
At the time of the launch, MAS payments director Loo Siew Yee welcomed the Code of Conduct.
“The BNPL Code sets out important industry-agreed standards and safeguards to mitigate the risk of debt accumulation and protect the interests of users."
Leanne Lim, regional head of compliance at Atome said: “The BNPL Code heralds an important phase for the industry in Singapore and we are honoured to have contributed to its formation under the SFA’s and MAS’s guidance.
“We remain committed to continue working with industry stakeholders to monitor developments, promote financial, social, and digital inclusion while safeguarding consumer interests.”
To encourage the adoption of and ensure compliance with the BNPL Code, BNPL providers will be required to undergo an audit and accreditation process which will allow them to display an accredited trustmark showing customers that they are compliant with the BNPL Code.
The next phase of rollout, including setting up of the credit information sharing bureau, completing the accreditation process, and awarding the trustmark to accredited BNPL providers, is expected to be completed by late 2023.
