Review of Buy Now Pay Later Regulatory Framework

Mr Desmond Choo asked the Prime Minister (a) what is the progress of MAS’ review of the "Buy Now Pay Later" (BNPL) regulatory framework; (b) what is the current value of such transactions in Singapore; and (c) whether such BNPL services have resulted in greater indebtedness in society.

"Buy Now Pay Later" or BNPL schemes allow consumers to pay for their purchases via instalments.

Currently, BNPL schemes do not pose significant risk to household indebtedness. They are not yet widely used relative to other payment methods. For example, industry estimates put the total value of BNPL transactions in 2020 at around $114 million. This is a very small fraction of the $92 billion in credit and debit card payments over the same period.

Further, the current features of BNPL schemes in Singapore are effective in mitigating the risk of excessive debt accumulation by consumers. For example, BNPL users’ accounts are subject to credit limits. They will typically be suspended by the BNPL provider – that means no further use of that BNPL scheme – once a payment is overdue. Late payment fees apply, but these are typically capped. As BNPL schemes do not charge compounding interest on the outstanding amount, the risk of rapid debt accumulation is also not large. As of end 2020, the total outstanding value of BNPL transactions was about S$12 million. This includes the value of instalments that had yet to fall due.

MAS is, nonetheless, assessing whether a regulatory framework is necessary to guide the evolution of BNPL schemes as they become more widely used in Singapore. This could include adoption of fair dealing practices by BNPL schemes. For instance, clear disclosure at the point of account opening is helpful in ensuring that consumers are fully aware of the late fees chargeable if they do not pay on time. MAS has been engaging BNPL providers and has been reviewing the experience in other jurisdictions where such schemes are more prevalent.