Mr. Wong Nai Seng, Head of Regulatory Strategy at Deloitte Southeast Asia, noted that even with the delinquency cap, it is still possible for consumers to “borrow” S$2,000 from each BNPL provider without go through no credit check, and end up with “substantial” debt.
To prevent this risk, the industry may consider setting different spending limits for customers.
“The limit may be based on credit information sharing agreements BNPL’s suppliers have committed to and vary depending on each customer’s income,” Wong said.
“For example, customers with no or low income, (like) students, should have lower spending limits.”
The Singapore FinTech Association, in response to questions from CNA, said the S$2,000 cap was intended to prevent BNPL clients from “overburdening their financial situation” and was determined based on data and feedback from the Singapore FinTech Association. ‘industry.
He did not respond to questions about the number of BNPL users who exceeded this limit and subsequently defaulted on refunds.
On whether it would consider more safeguards, association president Shadab Taiyabi said the task force had engaged with various stakeholders in developing the code of conduct.
“Going forward, we will continue to engage different stakeholders to receive their feedback and continue the discussion on how the code can further protect consumer interests.”
WILL BNPL DAMAGE ITS CREDIT RATING?
As part of the code of conduct, the BNPL industry will also set up a credit information sharing bureau by the end of 2023, with the help of credit data company Experian.
This will allow BNPL’s suppliers to share information about outstanding amounts and the status of customers’ outstanding payments with each other – a move welcomed by experts.
Although the code specifies that the information will only be shared for the purpose of providing BNPL services, the experts do not exclude the possibility that BNPL data may be shared with other entities, such as credit agencies and banks.
“Ideally, BNPL credit information should be aggregated with credit records maintained by credit bureaus for banks and lenders to provide a holistic view of each individual’s credit situation,” Wong said. .
“A lender can then decide whether or not to extend credit based on a more complete record of each potential customer’s credit history and risk appetite. It will also create stronger incentives for individuals to manage their borrowing prudently.
Echoing this, Mr Ruddenklau said data from the BNPL credit information sharing bureau would likely end up “being mixed in with other lending products”.
This “logical conclusion” signifies a potential impact on a person’s credit rating.
“If we routinely miss payments, lenders don’t like it because it looks like bad credit risk. So we have to take care of the little things to pay attention to the bigger things – in this case, a mortgage or a loan for health treatments,” he said.
Still, experts pointed out that while warranties are important, it’s still up to consumers to manage their own expenses.
“Could we set the cap for 18-20 year olds at S$500? Maybe,” Mr. Ruddenklau said.
“But I don’t think it will solve the underlying problem of understanding the value of money, making people responsible for themselves…and learning to live within your means.”