How can you use BNPL services responsibly? 4 M’sian finance bloggers share practical tips.

The BNPL industry is forecasted to balloon in the next few years. We already have a handful of Malaysian-born BNPL services available, with international names joining them too. 

Well-known apps like Shopee and Grab began offering BNPL services not too long ago, and cashback reward programme brand ShopBack acquired hoolah to do the same.

The participation of popular apps with immense followings would open up the concept of BNPL to a wider crowd, and could benefit those without access to a credit card.

On the flip side, many are warning that BNPL is a debt trap, especially in the hands of vulnerable, less financially literate individuals.

Thus, we reached out to a handful of personal finance bloggers to get some tips on how BNPL can be used wisely. They are:

But first, a preface on the bloggers’ BNPL stance

Similar to having a credit card, mortgage, car loan, etc., BNPL is another credit option. KC and Yi Xuan see BNPL as just another financial tool for users to manage their money, if used wisely under proper scenarios.

“The biggest benefit and downside of BNPL is its accessibility,” Yi Xuan said. “It allows people that do not have access to loans/credits to resolve urgent financial matters, yet if misused, it can cause a deep financial spiral.”

Helmi and Suraya, on the other hand, are sternly against BNPL. Helmi is of the opinion that nobody should live off credit or spend beyond their means, while Suraya believes BNPL causes more harm than good. 

In fact, Suraya’s own writeup spells out her stance quite clearly: “BNPL brings debt culture to the most financially vulnerable in society. Being the lesser evil than loan sharks is not an achievement.” 

Now, the tips

1.  Consider BNPL only if you can already afford the purchase

I’ve considered using BNPL to pay for my car insurance before. Realistically, I could comfortably afford that amount in one lump sum, but I wanted to spread out my payments over a few months because it hurts to pay a huge upfront amount. 

KC and Yi Xuan justified that this was a good scenario to use BNPL. “Especially when [doing so comes] without interest. There is no loss to you, but you gain the return you generate with the money while it is still in your hands,” said KC (more on this later).

“Set a money rule that if you purchase a big-ticket item, buy it only if you can afford it upfront.”

Alternatively, Suraya suggested using the “sinking fund method”, where the amount needed is already saved up in advance.

“Let’s say your car insurance is RM1,200 per year, so your sinking fund for car insurance is RM100 per month,” she exemplified.

If the purchase you intend to make is more of a want than a need, and you know you realistically can’t afford it with or without the sinking fund method, Helmi has a solid piece of advice: don’t buy it, or opt for a cheaper alternative you can actually afford.

2. Only take advantage of BNPL for the discounts

On the topic of only using BNPL if you can already afford the item you’re planning to buy, Suraya’s only reason to truly suggest using BNPL is to take advantage of the discounts provided. 

Yi Xuan could relate, adding that while he’s never used a BNPL service before, he would consider it if the promotion it comes with is really attractive.

3. Use BNPL if you plan to channel your remaining savings into investments first

With financial literacy education being the core of his career, KC advocates for his readers to be money smart.

So, when asked what situations he thought were justified for using BNPL, and how he’d recommend people determine if something is worth using BNPL for, he painted a scenario.

Say you have RM3,000 to buy a smartphone, and you have two options to pay off the amount: 

• Option A: Pay RM3,000 upfront in one go;
• Option B: Pay RM1,000 per month for three months using BNPL.

“You can choose Option B. After paying the first instalment of RM1,000, you still have RM2,000 that you can put into your flexi-loan account offsetting a housing loan interest of ~4%,” calculated KC. 

“Otherwise you could put it in a fixed deposit for a 2% return, or you can also put it in SSPN to earn ~4% return too. All the profit earned over the next three months is yours to keep.”

4. Avoid using BNPL to impress others

When the above question was asked to the rest of the finance bloggers, Suraya stated that BNPL is only justified in a life and death situation, where health and safety are compromised. 

Adding to her point is Yi Xuan, who thinks it’s valid to use BNPL for medical emergencies.

“I think it is not up to me to tell people how to value the BNPL service. Instead, let me suggest when not to use BNPL: Never ever use BNPL just to impress people around you, [which can end] up [putting] you in a worse financial state,” said Yi Xuan.

Helmi added, “The core issue is that most Malaysians are underpaid and we can’t afford basic life requirements. We are a third-world country with a first-world appetite.”

“So, stick to a budget and set a goal that you want to achieve. Stop following people online who promote pointless luxury lifestyles and live your life.”

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As Malaysia moves forward in its digital banking plans, all the finance bloggers interviewed believe that BNPL is inevitable in the country’s future.

Suraya highlighted that with the cost of living increasing and salaries not following suit, there is simply no other way to encourage people to keep buying unless they are given easy access to credit. “It’s just capitalism,” she summarised. 

KC pointed out that advanced countries’ economies are fueled by credit, which means that financial education is crucial with such accessibility.

“You can be money-smart so that you know how to make use of all the financial products available to you, responsibly,” he noted.

Meanwhile, Helmi believes the onus is on institutes to protect consumers. He hopes that BNM will come up with regulations for the currently unregulated BNPL sector.

Yi Xuan agreed, and shared that there need to be tight rules around repayment terms so these services won’t become “legal Ah Longs” with ridiculously high-interest rates.

“I think [BNPL services] are most certainly here to stay since I don’t see conventional banks [making] changes to the way they approve clients for loans/credits,” Yi Xuan observed.

Whether or not the dawn of digital banking services in Malaysia within the next one to two years will disrupt the BNPL landscape here though, is something that remains to be seen.

• Read more finance-related pieces we’ve covered here.

Featured Image Credit: Yi Xuan / KC Lau / Suraya Zainudin / Helmi Hasan