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In a busy week for Singaporean financial regulation, the government has played down the impact of buy now, pay later (BNPL) schemes, although warned they are keeping a close eye.
Earlier this week, the Financial Services and Markets Bill (FSM Bill) was passed, a significant piece of legislation that aims to enhance the Monetary Authority of Singapore’s (MAS) regulatory and enforcement framework across the financial sector.
The passing has resulted in an influx of financial services’ related questions from Singapore’s lawmakers.
In one, Desmond Choo, a member of the governing People’s Action Party, probed the government over BNPL schemes in the country.
The city-state, much like countries the world over, has seen a rise in BNPL use, with platforms such as Atome, which partners with more than 2,000 online and offline retailers and, Hoolah, which is also live in Malaysia and Hong Kong, becoming some of the most successful BNPL platforms in Singapore.
Choo asked about the total value of BNPL transactions, whether there are plans to regulate the industry, and whether younger consumers are being disproportionately affected by its rapid and unregulated growth.
Alvin Tan, the responding minister for industry and trade and MAS board member, played down the impact of BNPL in the country.
“Transactions have constituted a very small fraction of total consumer payments to date,” he pointed out.
Last year, BNPL transactions amounted to around $440m, which is less than 0.5 percent of the $103bn in credit and debit card payments, according to Tan.
BNPL schemes offered in Singapore currently do not pose significant risks of consumer indebtedness, he continued. “Some common features of BNPL schemes limit the extent of debt accumulation by consumers.”
For example, BNPL providers typically suspend users from making further BNPL purchases once payment is overdue and do not charge compounding interest on the outstanding amount and cap the number of late fees levied.
“The risk of rapid debt accumulation by consumers through BNPL schemes is hence not large,” he summarised.
All BNPL providers in Singapore have additionally set a minimum account opening age requirement of at least 18 years old.
In fact, he said, those who are 25 or older account for more than 85 percent of BNPL users and more than 90 percent of total BNPL transaction values.
“MAS is nonetheless closely monitoring the BNPL sector as such borrowings have the potential to grow rapidly,” Tan said, pointing out that the regulator is studying the experience of other countries where BNPL schemes have taken off more strongly.
For now, the regulator assessed that self-regulation, via an industry code of conduct, is fit for purpose in coping with BNPL risks.
Under the MAS’ guidance, the Singapore Fintech Association has launched a BNPL Working Group to develop a code of conduct for all BNPL providers.
The code, which is expected to launch in the second half of this year, will seek to mitigate the risk of consumer over-indebtedness and establish minimum safeguards to ensure that consumer interests are well-protected when using BNPL schemes.
AML vigilance against wildlife trafficking
Meanwhile, Louis Ng, a People’s Action Party parliamentarian and animal rights activist, asked the government about money laundering and wildlife crime.
This has been a topic that has been taken increasingly seriously by the standards-setting body, the Financial Action Task Force (FATF), which warned in a 2020 study that wildlife traffickers are exploiting weaknesses in the financial and non-financial sectors and that countries and the private sector are not prioritising efforts to trace and combat financial flows from this trade in line with risk.
Ng’s asked the government several questions on the topic:
- "For each year in the past five years, how many suspicious financial transaction reports related to wildlife crime have been filed?
- "How does the government determine whether there is underreporting of suspicious transactions relating to wildlife crime?"
- "What is the government doing to ensure that financial institutions keep a lookout and file such reports?"
In response, Tharman Shanmugaratnam, the minister in charge of MAS, said that financial institutions and other relevant business entities such as traders or agents are required by law to report suspicious transactions related to illegal wildlife trafficking.
“Mr Ng has highlighted an area of growing concern in the international community,” he said. “As criminals become more sophisticated in concealing their illegal activities, combating money laundering related to illegal wildlife trafficking will require constant vigilance and close collaboration between the government and the private sector.”
