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Perils of BNPL While Shopping Online!

As its name suggest, BNPL allows shoppers to purchase the items online first, then make the payment at a later date. But is it as rosy as it sounds?

by K. Vatsala Devi
online shopping has its perils

Throughout 2020 and 2021, Malaysians were stuck at home due to prolonged Movement Control Order that was imposed to flatten the Covid-19 curve, there wasn’t much to do. Pretty soon, almost everyone had encountered cabin fever at one point or another. The longer we endured the lockdowns, the more we craved to return to a semblance of normalcy. One of the normal activities that could be mimicked online was shopping.

Instead of walking around in malls, and stepping in and out of shops, we visited various online shopping platforms and browsed through different merchants and vendors, making purchases.

And shop we did. With so many online shopping platforms made available to us, Malaysians were spoilt for choices and as a result our statistics too hit the roof.

Hitting A New High For Online Shopping

The Edge in an article on October 20, 2021, titled “Malaysia e-shopping king of the region, 9 out of 10 online by end-2021” had stated that “Malaysia appears to be the region’s king of e-shopping. A recent retail survey has revealed that as many as 22 million consumers in Malaysia are digital consumers and online channels now play a four times larger role than offline channels. Not only do consumers spend 80% of their time online prior to making a purchase decision, they shop-hop across as many as seven websites before deciding to buy!”

Meanwhile, Retail Asia had estimated that the local e-commerce market would register a 24.7% growth in 2020. The market, they had speculated is expected to reach RM51.6 billion in 2024, and then increasing at a compound annual growth rate of 14.3% between 2020 and 2024. These huge numbers only reflect the changing habits of Malaysian shoppers, and this figure would continue to rise as many online shopping platforms and e-wallets offers attractive discounts and promotions.

Malaysia’s e-wallet adoption to could very well be credited to the intensive marketing and promotion as well progress in payment methods. From COD and credit & debit cards to collaboration with e-wallet platforms, the many payment options make shopping easy and enticing.

Online Shopping Made Irresistible

The latest payment method that has seen a huge uptake is the Buy Now, Pay Later (BNPL) system. As its name suggest, BNPL allows shoppers to purchase the items first, then make the payment at a later date, either at the end of the month or the following month. So how different is this from a credit card, you may ask.

Well, one of the differentiating factors of BNPL is unlike the credit card, installments for BNPL come at a zero percent interest rate. This payment system also works well for individuals who don’t want to own a credit card or are unable to get one but want the flexibility of making large purchases without busting their monthly budget.  

Currently, a search on the Internet reveals at least eight platforms that have the BNPL service, amongst them are Atome, PayLater by Grab, Hoolah, and FavePay Later.

With no visible downside to BNPL, we should all be clamoring to use the BNPL facility right? But wait, before you get excited and start making large purchases using this facility, it is important that you know some of the hidden traps that could saddle you with unnecessary debt.

The Devil In Disguise

One of the setbacks of BNPL is that you may end up spending more than it is necessary. Because the facility allows an individuals to make the purchase first and then opt for a suitable repayment method, a person could be making purchases beyond their means. BNPL also enable you to satisfy your whims and fancies without sparing a thought on affordability. This could also lead to overspending and impulsive buys. And saddled with commitment to repay various platforms could lead to a bulk of your salary going towards repayment. And as your dependency on BNPL increases, the cycle never ends.

Another weakness of of BNPL is that because it has a low threshold of eligibility, you don’t exactly need a good credit score to qualify. But bear in mind, that it isn’t always rosy with BNPL. If you have  a bad track record of repaying, this could inadvertently affect your credit score. And let’s admit it, with a bad credit score, your future financial plans could fall like a deck of cards because banks could reject your loan application based on a poor score.

And lastly, though these platforms offer an interest-free payment plan, if you fail to make a scheduled payment, you could get stuck with penalties and late payment fees that could nullify the benefits of BNPL because the fees and penalties could result in your purchases costing more than it originally did.

As the season of gifting approaches us at the end of the year, it is important to carefully consider your expenditure to ensure you are not snared in a vicious cycle of debt you cannot get out of. Before activating the BNPL facility on these online platforms, read the fine print, reads the terms and conditions carefully understand them and make sure your financial capabilities can make allowances for BNPL and that you are in  a position to make the repayment as scheduled.

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