UOB to launch 'buy now, pay later' feature in Indonesia; banks watching space

UOB will introduce a buy-now-pay-later (BNPL) feature in Indonesia soon, as it experiments with this space, said the bank's senior executives. (see Amendment note)

The move comes amid recent shake-ups in the Singapore BNPL market, with Standard Chartered tying up with local BNPL player Atome, and as ShopBack snaps up Atome's peer hoolah.

The bank later told The Business Times that the launch of this new service, dubbed TMRW Pay, will be in Indonesia, and that it will be working with a partner. It declined to elaborate on which partner and when.

Customers who opt for this payment mode can be digitally onboarded at the point of purchase, even if they are not currently UOB clients.

The bank, via its digital banking app, TMRW, will launch this soon, said Lee Wai Fai, chief financial officer of UOB.

BNPL platforms operate by allowing customers to pay their bills on relatively small-ticket items in instalments. The service does not incur a fee unless consumers are late on payments - and there, fees can be high on a percentage basis against the price of these items.

There are also concerns that as such platforms may appeal to young consumers, or those with less access to credit, BNPL platforms, by not conducting credit checks, may induce overspending.

UOB's Lee said a BNPL service allows customers to purchase an item, such as a personal computer, which is more specific to their needs, and is better than a bank handing out an unsecured loan where it is not clear what the money goes towards. The bank should also know that these customers have the ability to pay back the money.

"So that concept, I think, will be a safer appeal, because...we know what they're buying. It is something that we are experimenting on," he told reporters in response to a question from The Business Times at the bank's Q3 results briefing.

Wee Ee Cheong, CEO of UOB, said with the bank as the largest merchant acquirer in Singapore, it can take advantage of the BNPL concept. For the rest of the region, it partners BNPL players to provide this service.

"It's nothing very new. But at the end of the day, I think we must continue to stay prudent. That is important. You don't want to have the situation where the younger generation (find it) so convenient, they incur high debt. So as a bank, I think we have to be responsible," said Wee.

"But as a concept, yes, you make it simpler. At a point of purchase, you are able to access credit."

Meanwhile, OCBC's chief financial officer Darren Tan said the bank is "watching this space", and has a partnership with a BNPL provider. At the bank's results' briefing, he noted that the BNPL service targets a different customer base, and involves considerations over credit quality.

Singapore's BNPL sector is still largely unregulated, though the Monetary Authority of Singapore has said it is reviewing the appropriate regulatory approach for such schemes amid concerns over unseen debt.

In an industry first, StanChart In October said it will provide US$500 million in financing to Singapore-based BNPL fintech Atome Financial, under a new 10-year partnership to be rolled out in Indonesia, Malaysia, Singapore and Vietnam in the next few months.

This tie-up will initially include BNPL services and later expand to include digital-lending products. It aims to reach over 16 million customers in Asia by 2025 and gain access to multiple financial ecosystems to capture a share of the digital-lending market, estimated to be valued at US$92 billion by 2025 in South-east Asia alone.

Then in November, cashback platform ShopBack said it will acquire all of BNPL platform hoolah for an undisclosed amount. The acquisition will see ShopBack extend hoolah's BNPL offering to over 8,000 merchants on its platform, and offer this payment option to shoppers across 9 markets in Asia-Pacific, including Singapore, Malaysia and Hong Kong.

-- Additional reporting by Jamie Lee

Read more:

• Aggressive marketing of buy-now-pay-later schemes needs review
• StanChart, Atome in path-breaking US$500m financing deal
• Pay later, not never

Amendment note: UOB clarified that the new BNPL service will be launched in Indonesia. The article has been amended to reflect this change.