A senior lecturer is calling for tighter controls on the "Buy Now, Pay Later" (BNPL) scheme, suggesting it should be limited to essential, high-value purchases that can be considered investments.

Chakrin Utit, from Universiti Putra Malaysia’s (UPM) School of Business and Economics, believes BNPL should only be used for items like smartphones, personal computers, and home electrical appliances—rather than everyday low-cost purchases.

Why the Concern?

One of the biggest issues with BNPL is its easy accessibility. Unlike traditional loans, BNPL services don’t require strict credit checks, meaning even low-income individuals or those already burdened with financial commitments can use them. This increases the risk of debt accumulation and repayment struggles.

“To prevent BNPL from being misused for small, impulsive buys, a minimum purchase limit of RM500 and above could be introduced,” Chakrin suggested.

According to the Consumer Credit Oversight Board, the average BNPL transaction value for 3.7 million account holders was just RM84. Meanwhile, the total outstanding balance in the BNPL industry surged to RM1.42 billion by the first quarter of 2024—a 34% jump from the end of 2023.

Stricter Approval and Credit Limits Needed

To prevent BNPL from becoming a “debt trap,” Chakrin believes approval mechanisms should be more stringent, ensuring only those who can afford BNPL have access.

He also proposed:
✅ Adjusting BNPL credit limits based on users' income levels to curb overspending.
✅ Prohibiting the use of credit cards to pay off BNPL debt, avoiding the risk of getting caught in two different credit cycles.
✅ Making it mandatory for BNPL providers to report user credit data to systems like the Central Credit Reference Information System, preventing users from stacking up debt with multiple providers.

More Transparency, Better Consumer Protection

Another key issue is the lack of transparency in BNPL fees and penalties. Chakrin suggests that clearer disclosures on charges and a cap on interest rates should be introduced to protect consumers from being overcharged.

Meanwhile, UPM economist Rahim Samad highlighted that Bank Negara Malaysia (BNM) has already taken steps to restrict certain individuals from using BNPL services. Regulatory measures, he emphasized, are essential to ensuring the BNPL industry grows sustainably without jeopardizing household financial stability.

The Bottom Line

BNPL may be a convenient payment option, but without proper regulations, it can quickly lead to financial trouble. As more people turn to this payment method, industry players and regulators must work together to ensure responsible usage—protecting consumers while keeping the BNPL sector sustainable.

What do you think? Should BNPL be limited to big-ticket items only? Let us know your thoughts!