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 Later – the 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.
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. The individual platform may have requirements, but generally speaking it’s not a hard to be approved. 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. EDIT: GrabLater have since deleted reference to RM10 fee and instead states this: ‘The only fee that may be incurred is admin fee to reactivate your suspended account’.
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 paymentEDIT: They have since changed this. No fee for 4 instalments, but you are charged a RM120 fixed fee for longer tenure, up to 12 months
- (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.)
EDIT: Grab’s PayLater review – be careful of the prices there. There are reports of items being more expensive. Some tech items cost 10-25% more than other places.
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. The RM8 ones at grocery stores.
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.
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.