Update on "Buy Now Pay Later" Loans
Prime Minister's OfficeSpeakers
Summary
This question concerns the growth and regulation of Buy Now Pay Later (BNPL) loans, with Mr Derrick Goh inquiring about loan values, credit reporting, and measures to prevent consumer over-indebtedness. Senior Minister Tharman Shanmugaratnam reported that BNPL transactions grew to $440 million in 2021, though this remains less than 1% of total credit and debit card payments. He noted that a BNPL Code of Conduct is being developed to limit debt, featuring measures like suspending overdue accounts, prohibiting compounding interest, and requiring creditworthiness assessments. Providers are also exploring information-sharing mechanisms regarding customer delinquency to facilitate better credit assessments across the industry. Senior Minister Tharman Shanmugaratnam concluded that the Monetary Authority of Singapore will continue to monitor the sector to address any potential risks to consumers.
Transcript
1 Mr Derrick Goh asked the Prime Minister (a) what is the current total value of "Buy Now Pay Later" (BNPL) loans in Singapore; (b) what is growth rate of BNPL loans in the past 12 months; (c) whether an industry code for effective industry self-regulation will be developed; (d) whether the Government will consider requiring BNPL providers to report such loans to the Credit Bureau for financial players to properly assess consumers’ credit worthiness; and (e) what other measures are being considered to prevent over-indebtedness by consumers and over-lending by BNPL providers.
Mr Tharman Shanmugaratnam (for the Prime Minister): "Buy Now Pay Later", or BNPL, transactions amounted to $440 million last year. This is up from $114 million in 2020. However, BNPL transactions remain very small compared to other means of consumer payment. They were much less than 1% of total credit card and debit card payments last year.
Under the Monetary Authority of Singapore's (MAS) guidance, the Singapore FinTech Association established a BNPL Working Group in March 2022 to develop a code of conduct (BNPL Code) for BNPL providers here. The Code is on track to be launched this year.
The BNPL Code will limit the extent of debt accumulation by consumers. Measures under consideration include suspending users from making further BNPL purchases once a payment is overdue, not charging compounding interest on outstanding amounts, and requiring a user creditworthiness assessment before the user can exceed a stipulated credit cap with a BNPL provider. BNPL providers are also exploring sharing with one another information on customers’ outstanding amounts and delinquency status to facilitate better assessments of their customers’ creditworthiness.
MAS will continue to monitor developments in the BNPL sector and work with the industry to address any risks to consumers.