The rise of “Buy Now, Pay Later” (BNPL) services offers consumers increased flexibility in managing their finances. While these services provide immediate access to products and services, they also come with inherent risks, particularly when used irresponsibly. 

According to a statement from Financial Minister II, Datuk Seri Amir Hamzah Azizan, BNPL transactions surged by nearly 45% between the first and second half of 2024, underlining the growing popularity of these services, particularly among younger consumers. This significant growth has raised concerns, particularly with younger consumers, who make up the majority of BNPL users. While BNPL can provide short-term financial relief, the ease of deferred payments can easily lead to overspending and mounting debt. 

AKPK (Agensi Kaunseling dan Pengurusan Kredit) has noted that many consumers, particularly younger individuals, struggle with compulsive spending. A report from AKPK revealed that about 3 out of 10 consumers exhibit such spending tendencies, with younger age groups showing a higher level of financial distress compared to older individuals. This distress often results from underestimating the long-term costs of BNPL, transforming what seems like a helpful tool into a financial burden.

The Real Costs Of BNPL 

While BNPL offers immediate gratification, the long-term financial impact can be severe if not managed properly. Here are some key risks that consumers should be aware of:

• Increased Spending: The deferred payment structure of BNPL can tempt users to make purchases they cannot afford, leading to debt accumulation over time.
• Multiple Payment Obligations: Managing payments across multiple BNPL platforms can become confusing and challenging, leading to missed payments and late fees. 
• Potential for Over-Indebtedness: BNPL can be particularly risky for those already facing financial difficulties. The ease of access to credit can push users deeper into debt.
• Additional Costs of BNPL Usage: BNPL can involve more than just the cost of the initial purchase. Additional costs include late fees, high interest charges (20%-30% annually) if payments aren’t made on time, and penalties for non-payment that can impact your credit score and increase future borrowing costs. Unpaid balances and accrued interest can also compound, making the final amount owed significantly higher.

AKPK’s Advice For Smarter Financial Decisions 

AKPK offers practical advice for consumers to manage their finances more responsibly and avoid the pitfalls of BNPL. Their 3P formula is designed to guide individuals in making sound financial decisions: 

1. Purpose: Borrow only for meaningful and sustainable reasons. Ensure that your purchases contribute to your long-term financial well-being, rather than short-term wants. 
2. Payment Capacity: Borrow within your actual affordability, not based on eligibility alone. Consider factors like repayment periods, income stability, and existing debt obligations to assess if the debt is manageable. 
3. Payment History: A strong payment history is crucial for securing favorable terms on future financing. Late payments or missed deadlines can lead to additional fees and penalties.

Get Expert Guidance And Improve Financial Literacy

For those concerned about managing BNPL usage or other financial obligations, AKPK offers personalised financial advisory services. Their team can help individuals create budgets, manage debt, and develop strategies for long-term financial stability. 

Additionally, AKPK provides a wealth of educational resources, including online modules and a newly published book, “Realising Potential! Unleashing Your Financial Potential.” This book, part of AKPK’s GROW series, is aimed at guiding individuals—especially young adults—on how to manage their finances wisely as they begin their professional journeys.

Visit AKPK’s website here for more information and to access their financial resources.

• TAGS:
• AKPK
• BNPL
• Buy Now Pay Later