SHAH ALAM - The Buy Now, Pay Later (BNPL) payment option may seem like an affordable and convenient way to manage expenses, but experts warn that it can become a financial trap for consumers.
While BNPL platforms promote the ease of splitting payments into smaller installments, this method can lead to overspending and long-term financial stress.
Speaking in She Leads 6, financial expert and creator of Ringgit Oh Ringgit, Suraya Zainudin, highlights the shift in the credit landscape that BNPL has brought about.
"Back then, before BNPL, credit was primarily accessed via credit cards. To get a credit card, you needed a stable job, recurring income, and financial vetting.
"While people still incur debt through credit cards, at least they have a paycheck to pay it off. But BNPL has lowered the entry barrier to credit," she said in the She Leads 6 series titled Crowned in Confidence – Smart Money Moves to Thrive Financially recently.
According to Suraya, BNPL schemes were designed to open access to credit for a broader audience, including freelancers and self-employed individuals.
However, she noted that this expansion has led to a concerning trend.
"Data shows that when people use installment options like BNPL, they spend more. A purchase of RM100 turns into RM150 because consumers justify it as small, manageable payments.
"For companies, this is a win because it increases sales, but for consumers, it can spiral into financial burden," she added.
She also said that BNPL companies actively encourage merchants to adopt their payment systems, promising increased customer spending.
According to Suraya, this marketing strategy plays into consumer psychology, making it easier to justify larger purchases.
Suraya also pointed out that the notion of "financial responsibility" often touted by BNPL companies is not always realistic. While some consumers manage BNPL responsibly, the ease of access to credit can lead others into unmanageable debt.
Experts believe that BNPL requires stricter regulations to protect consumers. Unlike credit cards, which are regulated and require credit checks, BNPL services often lack the same level of oversight.