$440m of 'buy now, pay later' transactions in 2021; code of conduct to be rolled out later this year

In recent years, BNPL schemes have grown in popularity, as they cover many products in the online shopping sphere. PHOTO: HOOLAH

SINGAPORE - "Buy now, pay later" (BNPL) transactions amounted to around $440 million in 2021, a "very small fraction" of total consumer payments to date, said Minister of State for Trade and Industry Alvin Tan on Tuesday (April 5).

He told Parliament such transactions, which allow consumers to pay for their purchases in instalments, were less than 0.5 per cent of the $103 billion in credit and debit card payments.

Mr Tan was responding to Mr Desmond Choo (Tampines GRC) on behalf of Senior Minister Tharman Shanmugaratnam, who is chairman and Minister-in-charge of the Monetary Authority of Singapore (MAS).

In recent years, BNPL schemes have grown in popularity, as they cover many products in the online shopping sphere - including clothes and fashion accessories - that appeal to young consumers.

"BNPL schemes offered in Singapore currently do not pose significant risks of consumer indebtedness," said Mr Tan, adding that some common features of such schemes limit the extent of debt accumulation by consumers.

He cited how businesses typically suspend users from making further BNPL purchases once a payment is overdue.

Such schemes do not charge compounding interest on the outstanding amount, and cap the amount of late fees levied, he noted. "The risk of rapid debt accumulation by consumers through BNPL schemes is hence not large."

On whether there are plans to regulate BNPL schemes, Mr Tan said the MAS has assessed that effective industry self-regulation - through an industry code of conduct - should adequately mitigate the risks in the sector for now.

It is studying the experience of other countries where BNPL schemes have taken off more strongly, he noted.

The Singapore FinTech Association (SFA) has launched a working group to develop a code of conduct for all BNPL providers, under the guidance of MAS.

Mr Tan said the code - which should be launched in the second half of 2022 - aims to reduce the risk of consumers getting into debt, and to establish minimum safeguards to protect consumers when using BNPL schemes.

Mr Choo noted that BNPL schemes are "essentially unsecured loans", and an individual can make such purchases across multiple shopping sites.

He asked if there should be a limit on such transactions per person, and if MAS would consider making credit worthiness checks on BNPL schemes, similar to what it has been doing for credit cards, as such schemes could encourage spending beyond one's means.

In response, Mr Tan said the upcoming code of conduct will seek to "enshrine unique features" of BNPL schemes to limit the extent of debt accumulation by users.

MAS will continue to monitor and guide the development of the code, he added.

He also cautioned consumers against using BNPL schemes as a way to buy goods that they cannot afford.

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