Buy now, pay later: users determine whether they are risky or useful

BNPL’s services aim to split payments into interest-free installments, making it an attractive and convenient way to purchase items during this online shopping renaissance. Some are offered by shopping platforms such as Grab, Shopee and Fave; others are provided by BNPL platforms like Atome and Split. — Photo by Yusof Mat Isa

By Zarah Morden

Tuesday, July 5, 2022 7:00 AM MYT

KUALA LUMPUR, July 5 – Aaron SM, 27, used Buy Now Pay Later (BNPL) services precisely once and got harassed by SPAyLater representatives. To be fair, it was his fault.

He had bought a cheap washing machine as part of his research on BNPL for his work in e-commerce. Soon after, he went on vacation to the UK, forgetting about the installment payments totaling RM350.

“That was before they sent reminders,” he said. “Out of nowhere I received this email saying I was overdue and my account was banned from further purchases.”

The experience left him feeling like a criminal.

BNPL’s services aim to split payments into interest-free installments, making it a very attractive and convenient way to purchase items during this online shopping renaissance.

Some are offered by shopping platforms such as Grab, Shopee and Fave; others are provided by BNPL platforms like Atome and Split.

However, the convenience these services provide is part of what makes reliance on them “dangerous”, some users have warned.

Editor Kong Lee Lian, 32, said the services made her “spend more money than I should”.

She discovered that her coffee and food purchases through Grab PayLater were racking up bills of almost RM1,000 or more per month. She called it “pure waste in the name of convenience”.

Game tester Sangeetha Ravindran, 22, has a different view colored by her B40 background – the bottom 40% of Malaysia’s income classification.

She used Grab PayLater to buy an oven and a phone, two items she described as “overdue for an upgrade”. Yet she still felt the pinch of installment payments as someone who lives check to check.

Buy now pay later app icons are arranged, top left, Atom, Grab, Fave, Hoolah, Split and Shoope on an iPhone in Shah Alam on June 23, 2022. – Photo by Yusof Mat Isa

Buy now pay later app icons are arranged, top left, Atom, Grab, Fave, Hoolah, Split and Shoope on an iPhone in Shah Alam on June 23, 2022. – Photo by Yusof Mat Isa

“I think people who don’t earn enough to live a dignified life are the most vulnerable to these risks,” she added.

It’s an assessment Aaron agrees with. His experience in e-commerce and his experience working in the back-end of such projects led him to believe that BNPL programs incentivize low-income groups to spend more money.

BNPL services theoretically free up users’ cash in the way they distribute payments, but users also find it easier to spend beyond their means.

A doctor who still does housework, June C, 27, attributes this to the high credit limits given to users.

“A credit limit of RM2,000 will make me think I have RM2,000 to spend…which I don’t,” she said.

Distrust of BNPL’s perceived risks was widespread among users malaysian mail talked about, many of whom confessed to only using it for promotions and discounts offered in addition to zero rate policies.

Natasha Lim Ling Hui, 28, a consultant at an auditing firm, was first attracted to BNPL for her groceries because of the savings made from promotional codes provided by Grab for using its PayLater service.

She admitted that she finds the discounts more attractive than the ability to split her payments into multiple instalments.

Lack of regulation is another problem identified by users of BNPL services. Aaron noted that it was too easy to become a BNPL user as accessibility barriers were almost non-existent.

“You can use it even if you’re unemployed,” he said.

Still, some users believe that a strong sense of financial responsibility can help negate the risks for BNPL users of falling into a cycle of debt.

“If you’re a responsible person and you know what you’re doing, then you’re fine,” Aaron added.

“But you have to be a good payer and you have to track your spending. It is an exercise in restraint and fiscal responsibility.

Lim said it might be more useful than credit cards “because the interest is cheaper and more manageable, so it can get really affordable.”

The consensus seems to be that BNPL services can be financially worthwhile, but only if you know what you’re doing. It remains to be seen whether the risks of BNPL can be reduced with more regulation.

About Renee Williams

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