Regulations on BNPL vital for industry players, consumers

It provides protection for consumers and ensures a level playing field for the industry

by AZREEN HANI & ASILA JALIL / graphic by MZUKRI MOHAMAD

“BUY Now, Pay Later” (BNPL) players support the government’s effort to formulate a legal framework to regulate all consumer credit activities as it protects consumers and ensures a level playing field for the industry.

Atome believes the move is both timely and necessary given that it would also enhance transparency and accelerate financial inclusion in the country.

Read more: MOF, SC, BNM to look into BNPL scheme

“It also helps to weed out bad operators that would damage the reputation of responsible operators. What’s important is a framework for BNPL players and an industry level playing field that is risk proportionate while recognising benefits and convenience to consumers and the retail industry,” Atome head of compliance Leanne Lim told The Malaysian Reserve (TMR) recently.

Lim said Atome has been proactively observing and engaging with regulators in all the markets it operates in, including holding regular dialogues with Bank Negara Malaysia (BNM) and other relevant agencies.

The group is committed to the Malaysia market and has plans to expand its operations in the country.

Lim noted some of the areas of focus for the regulation would be risk control, consumer protection as well as appropriate Shariah compliance rules in BNPL’s operations, based on what has been publicly mentioned.

Read more: Young people flocking to ‘buy now, pay later’ online deals

“The regulator is also likely to be looking to strengthen oversight over non-bank credit providers such as ensuring charges are displayed in a transparent and clear manner to the user, ensuring Malaysians are not unduly over indebted by BNPL schemes and clearer marketing guidelines.

“One area is around strengthening the framework for consumer protection and encouraging healthy, responsible behaviour by the BNPL industry,” she added.

On March 21, the Singapore FinTech Association announced the formation of the BNPL Working Group which is an initiative that will develop a BNPL framework for the local market.

Atome, along with Grab Holdings Ltd and Hoolah Holdings Pte Ltd, were selected by the Monetary Authority of Singapore to develop the framework.

Lim added that the framework that the regulator is planning to develop in Malaysia coincides with many of Atome’s initiatives in Malaysia including the Malay language feature on the app and releasing a shariah compliant version of BNPL that is safe for Muslims.

Read more: 72% of Malaysian consumers want SMEs to adopt digital payment

“Atome is also working with more merchant retailers popular with Malaysians like Mydin, Al-Ikhsan Sports, PRISM+, MAJUHOME, Fashionvalet, Lilit and Duck.

“We will soon launch the Atome-Eid 2022 campaign, our first major Aidilfitri campaign in Malaysia,” added Lim.

Deputy Finance Minister II Yamani Hafez Musa told the Dewan Rakyat last month that the Finance Ministry, Securities Commission Malaysia and BNM are collaborating with relevant agencies to develop the comprehensive legal framework.

Yamani Hafez said the framework will be set in place with the enactment of the Consumer Credit Act (CCA) this year.

“With CCA, all credit and BNPL providers will be subject to relevant regulations that also encompass risk control and consumer protection as well as the appropriate shariah compliance rules in performing BNPL activities,” he said.

Malaysian Financial Planning Council president Vincent Kwo said this act will help regulate consumer spending as currently platforms like BNPL are unregulated and fintech applications must be used cautiously.

“To put this in perspective, a recent OECD’s 2019 report found that young people are more susceptible to short term credit through fintech applications considering that this group are the most active users of fintech applications.

“An Australian Securities and Investments Commission’s 2018 study in Australia found when credit is made more easily available, Australians have a higher tendency of utilising these credit lines. To substantiate this line of thought, the report concluded that 64% of users spent more than they normally would due to the arrangement,” Kwo told TMR.

He added that spending caution must be exercised to prevent more young people to fall into debt traps.

“As a country, the financial awareness level is still low. The council has seen some degree of improvement of literacy levels since our early formation but much more needs to be done,” he added.

ShopeePay, which is a mobile wallet under SeaMoney Finance Philippines Inc, also expressed its commitment to contribute to the endeavour.

“We support the government’s efforts in stepping up regulation of BNPL, which would strengthen protections for consumers and further financial inclusion in Malaysia,” a spokesperson from SeaMoney told TMR.

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