Singaporean Fintechs Take BNPL Regulation Into Their Own Hands

March 28, 2022
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Singaporean buy now, pay later (BNPL) providers have joined forces to create an industry framework for the Singaporean market under the guidance of the Monetary Authority of Singapore.

Singaporean buy now, pay later (BNPL) providers have joined forces to create an industry framework for the Singaporean market under the guidance of the Monetary Authority of Singapore (MAS).

The Singapore FinTech Association (SFA) announced that homegrown BNPL providers Atome, Grab and hoolah have formed a working group (BNPL WG) with a view to setting up a framework for BNPL market players.

The participants aim to launch the BNPL framework that addresses behavioural guidelines and enforcement mechanisms in the second half of 2022.

The work will focus on three key issues: 1) upholding fairness, transparency, and inclusivity; 2) protecting consumer interests; and 3) developing the best possible outcomes in terms of promoting innovation and consumer safeguards.

“The BNPL WG will hold itself and its members to the highest ethical and professional standards, holding themselves in conduct and practice to the guidelines outlined by the BNPL Framework,” the association said.

Commenting on the launch of the working group, Loo Siew Yee, assistant managing director of policy, payments and financial crime at the MAS, said: “The BNPL Framework will be an important step forward to formalising standards for the industry to ensure consumers’ interests continue to be protected. We support this initiative and look forward to the active participation of the BNPL industry in developing and effectively adopting the BNPL Framework.”

A business-centric regulatory approach

As in most jurisdictions, BNPL schemes fall outside Singaporean regulations on credit that apply to banks and finance companies.

The MAS previously said it was concerned BNPL could lead to excessive consumer borrowing, especially among youth and impulsive buyers, and stressed the need to set up a regulatory framework for BNPL, which “will be proportionate to the risks, and ensure that any potential convenience afforded by these BNPL schemes are not unduly curtailed”.

Although BNPL is becoming mainstream across parts of Europe, North American and Australia, it has not gained large adoption in Singapore. Nevertheless, it is forecast to be the fastest-growing e-commerce payment in Singapore through 2025.

The MAS estimated that the total value of BNPL transactions was $114m in 2020, which represents only a small proportion of total retail payments, when compared with the $92bn spent on credit and debit cards.

“MAS has traditionally adopted a business-centric approach to consumer credit regulation,” said Prasad Thandapani, a regulatory monitoring associate at VIXIO with expertise in Asian markets.

The MAS is essentially maintaining that it will not impose additional regulation or controls on commercial aspects of credit providers’ businesses as long as they carry out their business in a fair and transparent manner, he explained.

Just last month, for instance, it confirmed that it would not impose price controls on credit card fees as it considered it a purely commercial decision and that the Association of Banks in Singapore’s Code of Consumer Banking Practice already provides guidance on this matter.

“While the BNPL scene in Singapore is not as big or mature as its credit card industry, it is quite conceivable that this new BNPL framework will be given similar treatment, assuming of course that it is of similar calibre and is as widely adopted as the Association of Bank’s code,” Thandapani noted.

Regulators in the UK, the United States and Australia have already started to take steps to address potential consumer protection issues related to the new product.

Similar to Singapore, large BNPL providers in Australia launched a private initiative and adopted a voluntary code of conduct. Regulators and consumer associations are, however, largely sceptical about the effectiveness of that code and would prefer to see BNPL included in their existing regulatory framework.

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