By Danial Dzulkifly
SHAH ALAM, May 14 — The rapid rise of Buy Now, Pay Later (BNPL) in Malaysia has reinforced the urgent need for stronger regulations to prevent reckless spending that could lead to debt accumulation and defaults, especially among youth with limited financial literacy.
While recent data suggests BNPL users are generally managing their debt, experts warn that without tighter regulations and better financial education, the system could lead to long-term financial distress for many.
According to Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid, a recent Consumer Credit Oversight Board task force survey indicated that overdue BNPL payments had declined from 6 per cent in the first quarter (Q1) of 2023 to 2.9 per cent in Q4 2024.
“This suggests the majority of BNPL users have been able to make prompt payments, which indicates a level of financial responsibility. Additionally, 90 per cent of respondents are aware of the fees and charges involved, while 83 per cent acknowledge the risks of excessive BNPL use,” he said.
Afzanizam noted that broader data supports the notion that the average Malaysian is financially responsible, citing recent data on the Employees Provident Fund’s (EPF) Account 3.
“Seventy per cent of EPF members decided to put money in Account 3 (flexible account), which means the majority of our society has sound financial standing.
“However, awareness campaigns on financial literacy must be done regularly and consistently to avoid risks of non-(re)payment,” he said, adding that while BNPL provides greater access to credit, especially for underserved consumers, the scheme must be approached with caution.
“It’s a delicate balancing act. On one hand, BNPL can be deemed a form of financial development as it provides greater access to credit, especially for underserved customers. On the flip side, excessive use of BNPL could lead to higher indebtedness among Malaysians, especially young people. There is no one-size-fits-all solution.
“However, people are encouraged to exercise prudence in financial management, which can be achieved through engagement sessions by relevant agencies that promote holistic financial literacy,” he said.
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Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid seen in this file photo. — Picture by BERNAMA[/caption]
Easy credit, defaulting risk
For many, BNPL schemes are a lifeline, especially during festive seasons and promotional sales events such as the popular double-digit sale days (e.g. 11.11, 12.12). The concept mirrors traditional credit practices once used by small sundry shops, where customers could purchase on credit and settle payments later.
However, Universiti Teknologi Mara’s Prof Tan Peck Leong said while BNPL could instil financial discipline, it encourages impulsive spending.
“The accessibility of BNPL credit, especially on e-commerce platforms, makes it easy for young consumers without stable income, including students, to accumulate debt beyond their means. Many do not fully grasp the long-term consequences of missing repayments,” he said.
As of December 2024, total BNPL transactions stood at RM7.1 billion, with a total credit limit of RM2.8 billion. Yet, outstanding loans by BNPL clients have reached RM82.6 million, making up about 3 per cent of outstanding consumer debt.
“The concern is that many of these users are from the 21 to 45 age group, who earn under RM5,000 per month.
“They may not have sufficient financial buffers to handle unexpected expenses, making them especially vulnerable to falling into a debt spiral,” Tan said.
The Credit Counselling and Debt Management Agency has warned that financial mismanagement among young Malaysians is a growing concern, with 53,000 people aged below 30 currently undergoing counselling due to credit card debt.
Experts caution that BNPL may exacerbate this trend, as the lack of immediate financial consequences tempts users to overspend.
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Image for illustration purposes only. — Picture via PEXELS[/caption]
Regulatory safeguards and financial literacy
To address these risks, experts have called for stricter BNPL regulations and improved financial literacy programmes.
Tan proposed limiting BNPL eligibility to those with stable incomes to curb excessive borrowing and prevent financial distress.
“We need stricter eligibility requirements to ensure that only those with a reliable income can access BNPL credit. At present, youth, including students, are being offered BNPL credit far too easily. This must change,” he said.
Meanwhile, Afzanizam emphasised the importance of legal safeguards, pointing to the Consumer Credit Bill 2025, tabled in Parliament, as a positive step towards regulating BNPL providers and ensuring consumer protection.
“With laws such as consumer credit protection, we can establish guardrails against any unscrupulous practices by BNPL providers. However, beyond regulation, awareness campaigns on financial literacy must be conducted regularly and consistently to help individuals avoid the risks of non-payment,” he said.
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Weekend shoppers walk along Jalan Masjid India in Kuala Lumpur on September 1, 2024. — Picture by BERNAMA[/caption]
Universiti Putra Malaysia human ecology senior lecturer Desmond Chong Kok Fei meanwhile echoed these sentiments, stressing that financial literacy must be ingrained from an early age to prevent debt.
“By teaching young Malaysians the importance of budgeting, saving, and understanding the long-term implications of credit, we can cultivate a more responsible approach to managing finances.
“This educational focus should be embedded in school curricula and supported by public awareness campaigns,” he said.
Chong also suggested policies to limit easy access to credit, particularly BNPL services and unsecured loans.
“Similar to Bank Negara Malaysia’s 2011 measures on credit card approvals, which pose stricter criteria to reduce over-indebtedness, similar regulations could be applied to BNPL services.
“A cap on credit limits and thorough assessment of applicants’ income and debt levels could curb excessive borrowing,” he said.
Chong further proposed a cooling-off period for BNPL transactions to prevent impulsive purchases, especially among younger consumers who may not fully grasp long-term financial consequences.
“Policymakers could also explore incentives that encourage savings and long-term financial planning, such as tax incentives for savings, government-backed investment plans, or matched savings programmes,” he said.
Chong added that fintech solutions could be applied to promote responsible financial behaviour.
“Spend-capping technologies or mobile apps that alert consumers when they are nearing their borrowing limits could serve as real-time reminders to maintain financial discipline. These tools can empower consumers to make smarter, more responsible spending decisions,” he said.
