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Buy Now, Pay Later: Striking the Right Balance Between Regulation and Financial Empowerment

Written by Gideon Ng Published on   5 mins read

Many countries still do not have a clear regulatory framework for these flexible payment providers.

As countries grapple with the explosive growth of the Buy Now, Pay Later (BNPL) industry, there have been calls for more regulatory scrutiny to be imposed on BNPL providers, given that they are not subject to the same stringent requirements that apply to traditional credit products.

There is no clear consensus among the countries yet, as they attempt to juggle between protecting consumers from harm and encouraging innovation within the industry. Today, we’ll be looking at the state of BNPL in some countries and what they have done to tackle this burgeoning issue.


BNPL has become a popular payment method for Australians, as it accounted for 14% of total e-commerce transaction value in 2022. Banks in the country see BNPL companies as a huge threat, and coupled with the decline in credit card usage, they have started to offer no-interest credit cards like the NAB StraightUp Card and CBA StepPay.

These companies fall under one of the exemptions of the National Consumer Credit Protection Act 2009, but the government is looking to implement stricter regulations to protect consumers from harm. Three different options have been proposed to regulate these companies with varying degrees of stringency. This ranges from reinforcing the BNPL code to enhance clarity and including an affordability test, or alternatively, subjecting BNPL providers to full regulation under the Credit Act, where they are subject to the same strict regulations as credit card companies.

The government has sought feedback from stakeholders, including prominent players like PayPal, AfterPay, and Zip, and has received diverse responses regarding the proposed regulations. Most support the need for greater regulation but vary in their views when it comes to the specific approach and extent of regulation for these companies.


The Consumer Financial Protection Bureau (CFPB) issued a report in September 2022 to highlight some of the risks consumers face when interacting with BNPL services. This includes a lack of standardized disclosures which misleads consumers into thinking they are a zero-risk credit option, the practice of imposing multiple late fees on the same missed payment, and operational hurdles involved when consumers file billing disputes.

As more people are turning to this alternative line of credit — with a tenfold increase in loan value in 2021 compared to 2019 — CFPB’s Director, Rohit Chopra, wants BNPL customers to receive the same amount of protection as those who use a credit card.

The Bureau has signaled its intention to apply the same requirements for credit card companies to BNPL providers after they found that the number of borrowers being charged late fees is increasing (from 7.8% in 2020 to 10.5% in 2021).

Hong Kong

BNPL services have not gained significant traction like in other countries, but the Hong Kong Monetary Authority (HKMA) is concerned about the risks of over-borrowing by consumers. The HKMA is of the view that BNPL services are not that much different from unsecured personal loans, and has come up with several measures to better protect consumers.

BNPL providers are advised to promote responsible borrowing in their advertising and promotional materials, clearly disclosing that their services involve providing credit products, rather than misleading consumers by implying that no borrowing is involved.

Moreover, the HKMA wants affordability tests to be conducted to assess an applicant’s ability to pay before approving any BNPL loan.

However, these measures seem to only apply to banks that are offering BNPL services, such as Livi Bank and Ant Bank PayLater. There are some non-bank fintech firms that provide services in the country, including Splitit, which may not be required to comply with these regulations.


BNPL services are especially popular in the country, with around 19 BNPL providers operating in the country. However, these schemes are usually offered by non-bank operators, so they are not under the jurisdiction of the Bank Negara Malaysia (BNM).

During the 2023 Budget, the Malaysian government announced its plans to enact the Consumer Credit Act, which will impose a minimum financial requirement of MYR 2 million (USD 440,000) on BNPL providers.

Moreover, it will set up a Consumer Credit Oversight Board (CCOB) to regulate businesses that provide credit services. The government has received feedback from interested parties and will be finalizing the regulations by the end of the year.


The Monetary Authority of Singapore (MAS) is of the view that self-regulation is sufficient for BNPL providers, but they will monitor the situation. The Singapore FinTech Association (SFA) developed a Code of Conduct under the guidance of the MAS to set out standards that were agreed upon by eight BNPL providers in Singapore, including Atome, ShopBack, and Grab.

This includes capping the maximum amount of credit a consumer can borrow at SGD 2,000 (USD 1,500) unless the customer completes additional credit assessments, which involve income information and credit information that is shared across all providers via Experian. Other measures involve greater transparency of any fees related to late payments, and the extension of financial hardship assistance.

Eventually, BNPL providers will need to undergo an accreditation process to certify that they are compliant with this code of conduct.

Other Southeast Asian countries

BNPL services have gained traction in Southeast Asian countries that have a higher unbanked population including Vietnam (79%), the Philippines (78%), and Indonesia (77%). These providers offer a unique value proposition by providing access to credit for this unreserved market.

However, these unbanked populations usually lack the adequate financial literacy to use credit in a responsible manner, and this may eventually worsen the amount of debt they accrue. What’s concerning is the lack of regulations for BNPL providers in these countries.

Vietnam does not have a clear regulatory framework for BNPL providers, but BNPL payments are expected to reach a transaction value of USD 10.5 billion in 2028. Meanwhile, Indonesians have complained about the high-interest rates, late fees, and unethical debt collection practices by BNPL providers in the country.

Regulation plays a crucial role in ensuring that BNPL providers operate responsibly and protect consumers from the risk of overconsumption and debt traps. However, focusing on improving financial literacy is equally important. By educating consumers — particularly the underbanked population — about the responsible use of BNPL services, individuals are empowered to use BNPL services responsibly.


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