BNPL services rapped by CASE for false perception

The Consumers Association of Singapore (CASE) has called for stronger consumer safeguards after it received 18 complaints involving buy now pay later (BNPL) service providers in the past year and a half. The complaints include technical issues with payments and the inability of consumers to seek refunds, Melvin Yong, president of CASE, said in a blog post.

Yong said that BNPL services could lead to consumers spending more than they can afford to and making impulsive buys, due to a false perception of increased purchasing power. "This happens in the credit card landscape, and can just as easily happen with the proliferation of BNPL services. While the Monetary Authority of Singapore stated that BNPL services currently do not pose significant risks of consumer indebtedness, I believe that we need to do more to shape the nascent BNPL scene," he added.

Among the proposed safeguards include allowing consumers and BNPL providers to set purchase limits, notably first-time BNPL users and people with poor credit ratings who are deemed to be on shaky financial grounds, and regulating ads for BNPL services such that they display the total absolute amount that consumers would pay should they default on their instalments. "When deciding to use a BNPL service, consumers may not be aware of non-payment terms such as late fees and accruement of unpayable debt. Such mandatory disclosures will give consumers the full picture of the risks involved in using the BNPL service, thereby preventing reckless spending," Yong explained.

Additionally, Yong proposed that first-time BNPL users should be given a purchase limit, which will gradually increase if the consumer is shown to have good credit standing by making timely repayments. He also suggested enforcing a mandatory ceiling for users below 21 years old as the majority of younger consumers in that age group do not earn a stable income. 

To avoid the possibility of indebtedness, BNPL-related consumer spending should be included in consumers' credit ratings and consumers should be made aware of this, Yong said. "Consumers can then opt to have a holistic view of their credit standing including BNPL credit status, which will help them gain a better understanding of their financial situation before choosing to use the service," he explained. 

Addressing the need for assistance with technical issues with payments and refunds, Yong proposed for clear recourse avenues to be made clear to consumers before an agreement takes place, including making known to the consumer whether the dispute will be resolved by the service providers or the merchants. "This will help us to transition to a mature Singaporean BNPL scene where consumers can enjoy a seamless and smooth BNPL experience."

According to a 2021 report by Mileu, close to a fifth of Singaporeans aged 16 and above have used a BNPL service, and 73% said they would continue to use the service in the future. In Singapore, BNPL services are projected to see a 40% compounded annual growth through to 2025. Rewards and promotions were the main reason for the growth of the service, alike to the key factors for Singaporeans when choosing a payment method in general.

The study also added that the average basket sizes for BNPL are actually quite varied. Overall, 48% of purchases are SG$100 or less, while 25% of purchases are SG$500 or more. Most common types of purchases are for home furnishing and décor, electronics and travel.

Recently it has begun to make its mark in the hospitality sector and aviation scene. For instance, Atome also inked a deal with IHG Hotels & Resorts to offer BNPL at three of its hotels in Singapore. Atome also recently partnered with Cathay Pacific Airlines to offer BNPL offerings for its flights. 

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