'Buy now, pay later' schemes to come under new code of conduct

THE "buy now, pay later" (BNPL) trend does not pose a significant risk as yet to consumer debt levels in Singapore, but a code of conduct for the industry will be launched in the second half of this year, the House was told on Tuesday (Apr 5).

The Monetary Authority of Singapore (MAS) is counting on industry self-regulation to manage risks for now, and a code of conduct by the Singapore FinTech Association is in the pipeline, said Minister of State for Trade and Industry Alvin Tan.

BNPL transactions, where consumers make purchases on instalment, came to S$440 million in 2021, out of S$103 billion in credit and debit card payments overall.

But, noting that "such borrowings have the potential to grow rapidly" and are "fast gaining popularity", Tan said the MAS has "baseline expectations" for guidelines under the code, and BNPL providers will have to include safeguards against "financial imprudence" and over-indebtedness by consumers.

He added that the industry code of conduct should cement features already in place to limit debt accumulation. Such rules may include a minimum age of 18 years, a cap on interest and late fees, and a freeze on making further BNPL purchases once consumers miss a payment.

People's Action Party (PAP) MP Desmond Choo (Tampines GRC) had asked about the value of BNPL transactions in Singapore and any plans to regulate the sector, as well as whether BNPL schemes disproportionately affect younger consumers in terms of excess debt.

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Choo later also asked whether there should be credit checks and limits on an individual's use of BNPL facilities, while PAP MP Melvin Yong (Radin Mas) asked whether policymakers could curb advertising for BNPL schemes, similar to restrictions on cryptocurrency.

Tan said policymakers are studying the experience of countries where BNPL schemes have gained more ground, and the MAS will also keep monitoring developments.

Meanwhile, BNPL and instalment schemes "should not be used as a way to buy items that are more expensive than what consumers can afford and do not need", he said.