Are Buy Now Pay Later Schemes Evil?

Are Buy Now Pay Later Schemes Evil?

by July 5, 2021

Buy-now-pay-later (BNPL) arrangements have surged in popularity over the past couple of years, but the global pandemic has further pushed that growth to new levels. Although BNPL providers are offering consumers with potentially better choices and deals, as well as greater payment flexibility, BNPL arrangements also pose considerable risks revolving around consumer debt and financial literacy, experts said during a virtual panel discussion.

During the latest session of Fintech Fireside Asia, top executives and influencers representing the likes of Episode Six, hoolah, GHL Systems and, delved into the booming BNPL industry, and shared their views on these arrangements’ risks and benefits.

Consumer debt risk

Suraya Zainudin, a financial activist and the founder of, a popular Malaysian-based personal finance blog, was adamant that BNPL arrangements are more harmful to consumers than anything. She called out BNPL providers for creating a debt trap for consumers who are overextending themselves without fully understanding these products’ implications on their future financial health and credit standing.

Suraya Zainudin, a financial activist and the founder of

Suraya Zainudin

“BNPLs’ target audience is the consumer debt market so the people who are financing their lifestyle with debt. When you combine that with the fact that Malaysians have generally a low level of financial literacy, and high household debt levels, and [also the fact that] salaries are also not increasing – as a Malaysian, I’m scared how this trend will grow in Malaysia and I know it will grow… I don’t see how it could be a sustainable practice for the long-term,” Suraya said during the virtual panel discussion.

Dom Braun, managing director of Episode Six’s Asia Pacific operations, a digital API platform provider, said that although the risk of default and excessive debt from BNPL is real, these arrangements also offer consumers greater payment flexibility, and give them access to some essential goods which they would otherwise not be able to purchase.

Dom Braun, managing director of Episode Six

Dom Braun

BNPL options are also attractive to merchants, allowing them to win new customers, boost conversion rates and increase order value, said Kevin Lee, CEO of Malaysia’s GHL Systems operations, a payment services provider with multiple BNPL partnerships.

“From a merchant’s perspective, there are advantages to BNPL to opening up to a certain consumer segment that they don’t have today. .. and increasing customers’ basket size as well. Also, merchants don’t have to worry about whether they will be paid later or not,” Kevin said.

Kevin Lee, CEO of Malaysia’s GHL Systems

Kevin Lee

He compared these arrangements to credit card instalments, which have been around for a while, but because BNPL is so new, these providers are getting bad press.

BNPL versus credit cards

Arvin Singh, COO and co-founder, Hoolah, a leading BNPL platform in Southeast Asia, stressed that traditional credit products and BNPL arrangements operate under two different business models, implying that comparing the two would be somewhat irrelevant. While banks make money on late payments, BNPL providers are incentivized to have customers pay on time.

Arvin Singh, COO and co-founder, Hoolah

Arvin Singh

“It’s a flip model in that sense,” Arvin said. “Essentially, we run a working capital position. We have cash that we need to pay to our merchants prior to consumers paying us. Anytime you have cash, it costs you money … with the interest rate that we pay to borrow, etc., and so the later a consumer is going to pay us, the more it’s going to cost us as a business to not receive those funds. Our entire business focuses on helping merchants get those transactions through from consumers who are going to be able to pay on time.”

Rather than just handing out “a blank check” like a credit line would, BNPL platforms like Hoolah give customers access to installment payment facilities on just certain types of products, he said, limiting thus the flexibility of what customers have access to, and cutting out “vice purchases.”

A need for regulation

BNPL’s zero interest hook is another key area of concern for consumers, Dom warned, flagging the risk of hidden late payment charges that could introduce bad debt, and calling for greater transparency on fees.

Suraya called for rules on credit limit and surcharge, stating that she’s seen instances where merchants would price their products 10% to 25% higher when BNPL arrangement was offered.

Overall, the speakers agreed that regulation was needed both to protect customers but also to create a healthy and sustainable BNPL industry where operators are here for the long-run.

Dom noted that the Monetary Authority of Singapore is currently looking into regulating the space, especially considering the rising debt amongst younger generations. In Malaysia, the central bank is also looking into it, Kevin said, adding that introducing rules and requirements would filter out the less reliable and sustainable players.


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