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Why Buy Now, Pay Later is Evil Reincarnated

In case you don’t know, Buy Now, Pay Later is a trend that is really picking up in Malaysia and all over South East Asia. The idea is simple: to allow consumers to break up their (large) purchases into smaller payments in the future – much like credit card instalments.

Hate is a strong word, but I intensely dislike them nope hate is accurate; I hate Buy Now, Pay Later with a passion, and you should stay far, far away from them. Here’s why.

Buy Now, Pay Later Won’t Make You Happy

Buy Now, Pay Later service providers keep talking about how integrating the payment option will make the consumers happy, by allowing them to get what they want, when they want it. In fact, they’re calling it ‘stress-free’ and ‘the smart way’.

This is false. And I have the science to prove it.

According to the book Happy Money: The Science of Happier Spending by Elizabeth Dunn and Michael Norton, the 2nd Core Principle of Happier Spending is Make it a Treat – Turn our favourite everyday things into occasional treats to enjoy them better. Getting whatever you want, whenever you want is counter-productive.

Additionally – and this is important – the 4th Core Principle of Happier Spending is Buy Now, Consume Laterthe very opposite of Buy Now, Pay Later. Waiting and delaying consumption increases happiness, not the other way around.

(You can read the full article here: How to Buy Happiness: 5 Science-Backed Principles to Know TODAY)

Want more? Most Buy Now, Pay Later merchants sell material goods. They don’t make you as happy as you think.

So let’s not kid ourselves. Whatever happiness you get is temporary (followed by intense regret; I’m speaking of myself). The only people who truly get happy by Buy Now, Pay Later plans aren’t consumers, but merchants – indeed, they can make more money at the expense of people who struggle with delayed gratification oop.

Some of my digital marketer friends confirmed that sales did improve after integrating Buy Now, Pay Later payment plans for their clients. Split bragged about how they have processed RM10 million in transactions for their >250 merchants.

They target the consumer debt market

This is a screenshot from Hoolah, one of the Buy Now, Pay Later service providers in Malaysia. Look at that testimonial from an actual merchant: “Hoolah allowed us to penetrate into the market of debt holders without doing the heavy lifting”.

The message is very clear. They’re not targeting the affluent. They’re not targeting the financially well-off, the cash-rich, the (actually, not ‘just-look’) wealthy.

They’re targeting those who are used to financing their lifestyle with debt, or want to, if given the opportunity. I believe the word they use is ‘the aspirational consumer’, as if that’s a good thing.

An actual opening paragraph from a lifestyle magazine, promoting the use of Buy Now, Pay Later to live that ‘aspirational lifestyle’

Don’t get me wrong. Banks have been promoting aspirational lifestyle too, with tools like 0% instalment credit card payments and loans and whatnot.

But the difference is, one has to apply and get approved for credit cards and loans. Both applications require proof of recurring income and ability to pay back.

Buy Now, Pay Later plans require no such thing. You just need a debit card, and in some cases, just your MyKad. There are 4 million credit card holders in Malaysia. There are ~32 million Malaysians. You can connect the dots.

Buy Now, Pay Later have zero fees?

There’s this impression that all Buy Now, Pay Later payment plans impose zero fees to consumers. That’s not the case. I looked into some of the merchants which integrate Buy Now, Pay Later plan. Many of them only offer zero fees upon timely payments.

That means, if you bought something on Buy Now, Pay Later plans, and you’re facing cash flow issues next month, tough luck. Here’s the additional fee you have to pay for not having money. GrabLater takes it up a notch and charges RM10 admin fee to re-activate your suspended account, ON TOP of the charge for missing scheduled payments

I know what some of you are thinking (especially if you’re working with these Buy Now, Pay Later companies or a merchant registered with them): “But Suraya, they don’t get charged if they pay the instalments on time!”

Say hello to the admin fees:

  • Shopee charges 1.25% processing fee on order amount (and 1.5% late payment fee (effectively 15% and 18% interest per annum!)
  • Switch imposes one-time 4% admin fee to use Buy Now, Pay Later payment
  • (There may be more. I lazy to check all merchants)

So yeah. If you ever consider to take up Buy Now, Pay Later plans, check the semi-hidden fees before payment. You might pay more than you think.

(Although let’s not kid ourselves here too. We all know zero fee really means the cost is already calculated in the price and transferred over to customers.)

‘Responsible spending’

Tell me – how does one ‘responsibly spend’ for luxury items they couldn’t afford without instalments?

As quoted in The Vulcan Post, the CEO of Hoolah said

“With a market of 32 million people and only 4 million with credit cards, there was a great opportunity to bring a responsible solution to more deserving consumers to drive affordability, and personal cash flow”

Kudos to their PR department for that attempt, but I don’t buy whatever this ‘we promote responsible spending’ talk. We’ve seen this pattern with credit card users – according to this 2017 NST article, only 43.6% of credit card users pay their balance in full. Less than half of credit card users are using it responsibly, and they’re supposed to be ‘credit-worthy‘.

We can predict what’s going to happen. Look at Australia, where Buy Now, Pay Later is already a popular option:

The Australian Securities and Investments Commission found one in five buy now, pay later users is missing payments, half of users aged between 18 to 29 cut back on essential items to make repayments, and more than 1.1 million transactions in 2019 incurred multiple missed payment fees.

It also warned 15 per cent of users, and half under 29, had taken out an additional loan to pay for the services, while 55 per cent of consumers paying late had used at least two different buy now, pay later providers in the past six months.

One in five buy now, pay later users is missing payments – Australian Financial Review

My prediction is, unless Malaysians get higher wage – and that doesn’t seem likely, the way things are going now – Buy Now, Pay Later will create higher individual debt levels on a societal level, like it did with Australia.

And its the worse kind of debt, too – consumer debt. Most of the merchants using Buy Now, Pay Later services fall under Fashion, Beauty, Gadgets, Accessories, Electronics, Home & Living and even Travel (!) categories.

So, okay, you’re a RoR reader. You’ll be like, OK OK Suraya I won’t get what I can’t afford, yes agree consumer debt is not good. Guess what..

Buy Now, Pay Later plans will still affect you if you don’t use it

Buy Now, Pay Later plans will affect you in two ways.

#1 – You will spend more

First – it will increase your spending for non-essentials.

The fact is, you’re on social media, I’m on social media (unhealthily so), and we all see posts from friends, families, and various public figures. All of us post the best versions of ourselves online, our version of aspirational lifestyles. Heck, I do this. I have my personal brand to maintain.

I’ll give you an example. I’ve recently started spending money on fresh flowers.

RM8 is not much, and yes they do make me happy, but the only reason why I desire fresh flowers in the first place is because I see people I like and admire having them in their homes.

Aspirational lifestyle.

Compound this with every single aspect of your life. Home decoration and organisational tools (I too, like the minimalism aesthetics). Clothes. Gadgets. Hobbies. Even if you get a cheaper version of the item (as I did with the flowers – the bouquets I wanted were like RM99??), these expenses were still technically unnecessary in the first place.

Excessive consumption is not good in the first place – not for the planet, not for your wallet. I still buy a lot of shit even knowing this fact; I’m not immune to wanting what society wants. So far, I can afford it, so it’s all good.

But what’s sad is when excessive consumption is promoted as a lifestyle to those who can’t afford it – the B40 and yes M40 too.

#2 – You might have to pay for them

The second way Buy Now, Pay Later plans will affect you is more worrying. Let’s assume that okay, let people buy what they want to buy, it’s their life, right?

Wrong. Even if you’re financially secure and stable, it’ll be YOUR tax money and donations that will fund social welfare for the debt-ridden in the future.

That’s not an unreasonable statement to make. Collectively, millions of Malaysians took out RM19.52 billion from their retirement savings via i-Sinar (number likely higher; article dated Jan 6 2021). Again, wages aren’t increasing. The cost of living keep on increasing; the pressure to spend is real; marketing efforts gets better by the day.

Now one of the barriers to spend is further eliminated by Buy Now, Pay Later payment plans. How do you think this will end up, 10, 20, 30 years from now?

Malaysians are generous people (the 10th most generous globally, based on one index). I fear it’ll be up to us at the time. What else are we going to do, ignore the homeless?

Your thoughts on Buy Now, Pay Later

Don’t give me that crap on ‘but it’s just an option, take or don’t take up to you la’. Biggest bull I’ve ever heard.

It doesn’t make you happy.

It may not be zero fee.

It’s not encouraging responsible spending. I mean.. they literally tell merchants their order sizes will be bigger.

And it will affect you even if you don’t use it.

Therefore my final judgement: Buy Now, Pay Later is evil. It is so harmful to society. I wish this trend will die, but I know capitalism will win, sigh, so here I am bitching on my own personal platform.

Let me know your thoughts. If you’re a Buy Now, Pay Later provider, I would love to hear (without PR-speak if possible) – anything in the pipeline for merchants offering Essential services, for example Groceries with no fees? THAT would be a saving grace.

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23 Comments

  1. Thanks for writing this. Agree very much to what you say. There’s no free lunch in this world (although it looks like it really won’t cost anything), the very truth that this promote impulsive (and impromptu) spending that driven by short term need and desire will come with a huge “price tag”. I also feel sad that the group that will likely be using this could be those with lower income, whereas they should be receiving more education, protection, not exploiting on their lack of today.

    1. Can you believe the bnpl supporters said this is good because this allows ‘access to credit for all’? They also push for ‘more education instead of regulation’

      Predators

  2. You are seeing only from one point. Easing the flow of finance helps society advance. Imagine if everyone adopts your thinking of spending only if they have money. Businesses will not get started. If someone has an idea, but has no money, his business will never start. Banks and financial institutions have given many opportunities to prospective businesses to thrive. Of course, many fail as well and ended with crippling debt. Is it the fault of the banks for charging interests? No. The same goes with consumer spending. This is no different from credit card in that it eases cash flow for a larger segment of society. The evil is not with these innovative solutions we have today. The evil is the lack of financial knowledge among Malaysians and people in general. Schools should teach people about financial management. Period. Without these credit cards and Pay Later schemes, people with bad financial planning will still remain poor.

    1. It’s odd that you are in a personal finance blog because consuming only the money you have is the gold standard in personal finance. Capital expenditure/ Investment spending you’re referring to should not be the responsible of a semi-banked (no credit cards) consumer. (Sorry Suraya, have to say this)

        1. Ops, sorry. I thought Mr Vincent took time to read personal finance website, which by definition, aims to educate readers to be better with money, don’t go into bad debt. So it’s odd that he thinks people should spend money they don’t have to get the economy moving.

          Next, if spending is how we get the economy moving, my view is this burden should be taken by government, corporate or wealthy individuals, not the less informed public.

          Finally, calling it innovation? This is nothing new, it’s bringing an old installment payment system into our phones. Ride under the gov licensing policy and now sounds cool. Efficiency? Credit/debit card process speed is as fast. Reach and accessibility? Maybe but that’s at the cost of financial security among the most vulnerable society. True innovation generates value, and this is no where near. (Do prove me wrong, pls)

  3. I frequently use 0% credit card installment to “earn” a little extra on big purchases. Even so, I dislike buy now, pay later because nearly none of the vendors are essential items. Like, if you go in debt because you want to buy groceries, not ideal but okay la. And flat rate charges means you can be smack with big % for small purchases. Putting both together, they are literally the worst of worst consumer debt.

  4. Don’t blame others for your failure to control your impulse.

    Like what Vincent Lim said above, the solution is to educate the public, not to limit financial innovations.

    On a side note, no BNPL provider will want to intentionally bankrupt their customers. They exist to make profit, and they won’t be making profit by bankrupting their customers. They will eventually self regulate themselves by having controls and policies in place.

      1. Suraya, been a long time follower/lurker and have always thought highly of you and your writing BUT responding with this kinda snark to people that disagree with your is very disheartening to read.

  5. I have never used stuff like this and always pay my credit card bill in full every month as well. It’s more of a marketing tool to increase conversions rather than a utility to customers imo. Agree that there is some benefit to businesses, but I also “intensely dislike” buy now pay later.

    By the way, the site so easy to read and comment on with mobile now 👌🏼

  6. I would like to quote one point that you wrote but decided to ignore, “zero fees upon timely payments”. If people follow this, the scheme brings to a win-win situation. In some cases, this might even be an aid tool.

    What the gentlemen above saying is true. Don’t blame the system when you cannot distinguish what you can and cannot afford. Educate yourself instead. If everyone is following your way of thinking, the economy in the area will progress rather slow. Individual cash rich is not more important than individual financial literacy.

    Some people use knife to cut fruits, some use it as a weapon to hurt others. The scheme is a tool, it is up to the person on how to use it.

    1. It wasn’t ignored. There’s literally a whole section on it, covering admin fees

      On this issue of personal responsibility. Yes absolutely one must educate oneself, to defend against the lure of such attractive offerings. At the same time, who protects the most vulnerable, the ones with low media and financial literacy?

      How to say ya. It’s like.. being a smoker who wants to quit for health reasons but the tobacco companies keep showing how the product will make me happy and offers it everywhere. Ultimately, its up to me, but there’s a reason why now tobacco companies cannot show ads and have blank packaging.

  7. Thought I should share my experience with GrabPay.

    Sometime last year Grab granted me a PayLater facility without prompting. I use GrabFood frequently during the lockdown to order food delivery for myself or for my loved ones thus am fine with food delivery service markups. It seemed logical to just use a postpaid service as it makes me better aware of my expenditure in food delivery services.

    Never had issues with paying it as I normally pay it off when prompted on the 1st of the following month. If your bill remains unpaid past the 7th, they’ll charge you an “admin fee” of RM10.

    After a few months, they quietly raised my credit limit by 120%. 3 months later they raised the credit limit again. So within 7-8 months they tripled my credit limit all without prompting or notice to me. I was aware of it as I would normally check the amount charged after every transaction due to an incident of being wrongly charged before.

    Anyway, early Jan my dad broke his phone. Due to Covid 19 restrictions I was unable to buy him a new phone & travel home to pass it to him.

    I saw on Grab that they had the PayLater option for a reknowned phone dealer who also did delivery service. So I checked out the merchant website & found a phone for my dad. I compared on other platforms & saw that the price was competitive so I decided to try out the BuyNow PayLater service.

    Here are a few things I found out:

    1. Upon purchase, I was required to pay 1st month payment immediately which made sense.

    2. The BuyNow PayLater service doesn’t work like conventional PayLater for Grab services. You don’t get GrabPoints for your purchase unlike the latter. I was surprised I didn’t get points & was only aware when I asked their CS.

    3. For PL, your calendar month expenditure is due by 7th of the following month. But for BNPL, it’s due on the recurring date of the month. I did my purchase on Jan 6th. So my recurring payments are due on Feb 6th, Mar 6th & Apr 6th.

    Now this is where it gets interesting. You cannot pay earlier.

    I was settling my PL for Jan this morning. No problems. I tried to settle my BNPL dues for Feb & the only option I had was to settle the entire amount i.e. the remaining 3 months in a lump sum.

    So right now I’m gonna come back on Feb 6th to check & see if I can make payment on that date. I’ve also topped up my wallet to ensure I’ve enough to cover the installment incase it is deducted automatically.

    I find this problematic because I would prefer to be able to pay the outstanding installment anytime I wish. For the PL, you can even make partial payment of the bill which I did once when I was close to maxing out the limit.

    Not sure if these insights are new to you but I’m inclined to agree that BNPL by these e-wallet providers are a bane to our society especially the lower income groups if not used properly.

    Let’s see what happens when Feb 6th comes round.

    1. Thank you Luke for sharing your experience as a user. Raising credit limit without knowledge and not able to pay off early unless settle all payments is new info to me. Really appreciate it

      Let us know after 6th on the payment. Is it deducted automatically?

    2. yeah, this is where and how they make money. one need to be smart to know every details of option, unless so you’ll be trapped with their hidden net. thank you for bringing this to public.

      of course as ,as many argued, the public had to educate themselves but the marketers too little innovative in trapping people.

  8. Agree 100%. Marketers prey on insecurities and ignorance of the mass. This is one of the worst financial tools I’ve ever seen. And yes, good work on revamping the website, well done!

    1. My prediction: they will emphasise on the few instances where bnpl might be used for good reasons (buy laptop for studies etc), and ignore the collective harm they’re causing

  9. Agree with you Suraya. As for me, I pay cash for everything. If i have money i buy. Otherwise i just go cuci mata and out. Like you said, the thing with buy now pay later is all for non essential thing. We can still live without those things.

    Couldnt agree more when you said melayu jatuhkan melayu with those exessive lifestyle.

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