New code of conduct to lay out standards for providers of ‘Buy Now, Pay Later’ services

RESTRICTIONS on outstanding payments, fee transparency and an accreditation scheme are among the new standards set for “Buy Now Pay Later” (BNPL) providers in Singapore, under an industry code of conduct unveiled on Thursday (Oct 20).

The code was formulated by a working group comprising the Singapore FinTech Association (SFA) and industry players such as Atome, Grab Financial Group, Pace, SeaMoney and ShopBack, under the guidance of the Monetary Authority of Singapore (MAS).

To encourage adoption of the code, BNPL providers will be required to undergo an audit and accreditation process by an independent expert assessor. These providers will have to pay an application fee of S$5,000 for the assessment process.

The next phase of the code’s rollout will entail setting up a credit information sharing bureau, completion of the accreditation process and awarding the trustmark to accredited BNPL providers. This is expected to be completed late next year.

The code’s key components are as follows:

Credit-worthiness safeguards

Each BNPL provider will permit customers to accumulate no more than S$2,000 in outstanding payments at any given time, unless they complete an additional credit assessment.

This assessment must consider the customer’s income and credit information shared across all BNPL firms. Providers will suspend customers’ access to the service upon failure to meet the payment obligations.

Fees and disclosures, ethical marketing

The code also specifies that BNPL providers will cap all fees, including late fees, and that fees and interest will not be compounded. All fee structures must be communicated in a transparent manner.

Consumers will be entitled to make full repayments without early repayment fees. Providers will have to ensure that consumers have access to account statements consolidating the total outstanding balance of purchases made through their BNPL provider.

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The code also advocates ethical marketing practices, where BNPL providers ensure that advertisements comply with the relevant advertising codes and are not misleading or deceptive.

Voluntary exceptions and hardship assistance

Providers must allow consumers to voluntarily exclude themselves from BNPL services and promotional materials once this has been communicated via writing. Providers will retain a list of the customers who have voluntarily excluded themselves.

For consumers facing financial hardship, the code specifies that providers consider extending assistance to work out a mutually acceptable payment arrangement with them. During this time, BNPL providers will not allowfurther transactions. They also commit not to initiate bankruptcy proceedings against customers.

Confirming compliance

Accredited BNPL providers will be required to provide a signed attestation by their directors every year to confirm compliance with the code for the prior year. The provider will undergo re-accreditation by the independent assessor every three years.

The provider’s accreditation will lapse if the attestation and re-accreditation are not successfully completed within the required timeframes.

Existing BNPL providers are given 12 months to come into full compliance with the Code.

Loo Siew Yee, assistant managing director for policy, payments and financial crime at the MAS, said that the code “sets out important industry-agreed standards and safeguards to mitigate the risk of debt accumulation and protect the interests of users”.

She added: “We will continue to monitor developments in the BNPL sector and work with the industry to address any risks to consumers.”

Representatives of the SFA from Atome, Grab Financial Group and ShopBack-owned hoolah likewise affirmed their commitment to the development of the industry.

The industry players in the BNPL working group are: 1. Atome 2. Grab 3. ShopBack 4. Ablr 5. Latitude Pay 6. Pace 7. Split 8. SeaMoney