Buy now, worry later? Are consumers more likely to overspend with BNPL?

The beginning of the Covid-19 pandemic has accelerated Singapore’s transition into an increasingly cashless society, and even with measures being largely lifted to return life to normalcy,  it is still commonplace to see more online payment options offered in stores, such as scan-to-pay QR codes and digital wallets.

E-payment has undeniably morphed into the new norm, and as more people go cashless, consumer and data analytics show us that cash use has decreased with additional data indicating that  41 per cent, almost half, of Singapore’s population now employ the method as their mode of payment. Additionally, the choice to “Buy Now, Pay Later” (BNPL) is gaining traction amongst consumers, with its usage increasing from 4per cent to 9per cent in the same period. 

With the introduction of BNPL alongside the rise of e-transactions, payment is now quick, efficient and seamless. The BNPL scheme is also convenient: Make a purchase now, and you can pay it off another time, maybe even over a few instalments at fixed intervals – with no added interest.

However, criticisms surrounding the BNPL stem from the worry that it is covertly paving the way to a negative change in spending attitudes: Are consumers now more likely to overspend? Prime Time’s Bharati Jagdish speaks with Bryan Quek, General Manager, Atome Singapore to find out more. 

Bharati Jagdish: How has all of these helped your business and revenue, since the pandemic hit?

Bryan Quek: Definitely, we have seen tremendous growth at Atome – and we are only about two and a half years old. In the last year and a half, with the pandemic hitting, we have seen an uptake in the number of GMV and transactions that we are having. Regionally, Atome is in 10 markets across Asia. We have about 15,000 merchant partners; and these merchant partners are seeing the increased demand in Buy Now, Pay Later (BNPL) and are considering it to be offered as a payment solution for their customers.

When choosing a payment method for a purchase, maximising the return is a priority, even more so than convenience. Despite being a fairly young category, many BNPL providers offer promotions, rebates and rewards programs. They are inherently mobile, and it seems that Singaporeans could be turning to these offers as ways to maximise returns of their spending. 

Bharati: We are seeing a lot of criticism about the BNPL scheme, especially with the danger of overspending, analysts are worried about Gen Z in particular. They are saying the attitude is “Buy now, Worry later”.

Bryan: The way a “Buy now, Pay later” makes money, would be from charging a fee to the merchants for the service to be offered. This is unlike the traditional credit card, where there is a fee but there is also an interest fee charged to consumers who do not manage to pay back. So if you look at the BNPL way of making money, we will not make money at all if the consumer is unable to pay us even in the next payment.

It is in our interest to ensure consumers are able to pay back on time. We only levy a small fee, if the consumer is not able to do that. That is a fixed fee not based on the percentage terms. This is why I feel there are concerns in the market. I do think that BNPL actually has the best interest in ensuring that our consumers spend wisely.

ALSO READ: Buy-now, pay-later plans: Are they really worth it?

Bharati: Would showing that Atome has a vested interest works? It seems that you don’t vet consumers the way credit card and bank companies do.

Bryan: We do not. Atome’s merchant partners are specifically targeted at the Gen Z population, as they look for services that are convenient and able to move quickly. In Atome, we offer a small amount for the consumers to make their purchases, and as they purchase overtime, we increase the amount that they are able to spend on merchants across our platform. 

Bharati: Just like banks before they give a loan, how do you ensure that people who buy actually have the means to pay? 

Bryan: We currently employ a KYC (Know Your Customer) system, in which Atome leverages off other companies’ services to keep an understanding of who our user is, and the credit limit that we can assign to them for payments. Currently, less than 1per cent of the users in Singapore miss their payment; this shows that the system is working, and that it is making sure that most users are able to pay their fees on time, even if their payments were split into three. 

Bharati: The thing is that with each BNPL payer being in control of their payments, the Consumer’s Association of Singapore has recently called for a stronger safeguard in the form of purchase and penalty limits, regulations on BNPL advertising, the inclusion of BNPL-related spending data in consumers’ credit ratings and clear recourse avenues. What do you think about these suggestions? 

Bryan: I think that they are very interesting. The Singapore FinTech Association, under the guidance of the MAS, has established the BNPL Working Group – with Atome being under one of the founding members.

The industry has initiated the BNPL Framework for a code of conduct in the Singapore market to protect consumers and ensure that they have a channel for feedback to the BNPL providers, all while making sure that there are sufficient safeguards for the consumers.

Listen to the full podcast on Awedio: SPH's free digital audio streaming service, as Bryan Quek shares more on the art of balancing the BNPL scheme such that overspending and overleveraging is avoided.

Download the podcast.

This article was first published in MONEY FM 89.3.