JAKARTA: Buy Now, Pay Later (BNPL) schemes in Indonesia are incurring increasing consumer debt, driven by greater ease of access and the growing popularity of such services.
Consumer debt incurred through BNPL schemes rose to 6.13 trillion rupiah (US$382 million) as of March 2024, an increase of 23.9 per cent from the same period a year ago, according to data from the Financial Services Authority (OJK).
OJK attributed the surge to the relative ease of access for BNPL services compared to traditional credit cards, making it easier for consumers to access credit.
Unlike traditional payment methods, BNPL offers consumers an alternative to upfront payments without using credit cards. It also functions as a short-term financing option for specific transactions, allowing users to make purchases and defer payments.
BNPL has been growing in popularity – not just in Indonesia, but in the wider region. The projected market growth of BNPL in Southeast Asia is US$33.6 billion by 2027, according to a February report by Singapore’s Lee Kuan Yew School of Public Policy (LKYSPP).
“The region’s unique combination of a large unbanked population and increasing internet accessibility makes it fertile ground for BNPL players,” the article stated.
But as BNPL gains ground, so too do the concerns. For example, some consumers in Malaysia have found themselves entangled in a web of purchases and debt.
Unregulated BNPL services may expose consumers to the risk of accumulating debt beyond their means, the LKYSPP report pointed out.
It also noted that BNPL has become immensely popular among younger generations, “namely Gen Zs and millennials”.
In Indonesia, millennials constitute the largest group of BNPL users, comprising more than 52 per cent of debtors or almost 7 million debtors per month, according to a February article by local media outlet Bisnis.com that quoted Indonesian private credit bureau IDScore.
They were followed by Gen Zs with 35 per cent of the debtors or an average of 4.6 million debtors per month.
Indonesia’s OJK has been exploring regulatory frameworks tailored to BNPL services to ensure sustainable growth and consumer protection.
OJK’s deputy commissioner for the supervision of financing institutions, Mr Jasmi, who like many Indonesians goes by one name, last month said that there was a need for balanced regulation that supports industry growth while safeguarding public interests.
“OJK is conducting a study on BNPL, including whether it requires specific or general regulations,” Mr Jasmi said as quoted by Antara.
Meanwhile, Mr Heru Kristiyana, President Director of the Indonesian Banking Development Institute (LPPI), acknowledged BNPL’s role in fostering economic growth but stressed the imperative for prudent regulation to mitigate potential risks to society.
Despite concerns over financing risks, OJK said it expects growth in the use of BNPL as more people come on board.
OJK’s chief executive for supervising financing institutions, venture capital firms and microfinance institutions Mr Agusman, who also goes by one name, said the total receivables by BNPL will continue to increase.
“The performance and growth of BNPL financing companies are projected to continue to increase along with the development of technology that makes it easier for people to conduct online shopping transactions,” said Mr Agusman on Thursday (May 16) as reported by local media outlet Kumparan.com.
Highlighting the sector’s resilience, he added that financing companies remain committed to the model.
Several major banks, including BCA, Mandiri, BNI, CIMB Niaga, and Allo Bank, have already integrated BNPL services into their offerings.
