BNPL service providers face tighter regulations to mitigate risk of consumer over-indebtedness

Buy Now, Pay Later (BNPL) service providers will now have to meet a set of standards and be accredited by the Singapore FinTech Association (SFA) by 31 March 2024. Created under the guidance of the Monetary Authority of Singapore (MAS), the Code aims to provide safeguards to mitigate the risk of consumer over-indebtedness.

These measures are to comply with the SFA’s BNPL Code of Conduct, launched in October 2022 and entering its latest phase of implementation in November 2023. The Code implements a range of standards to promote industry best practices. This includes creditworthiness safeguards, fair and transparent fees, clear disclosures, ethical marketing practices, accommodation for voluntary exceptions, and financial hardship assistance.

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Under the Code, service providers are required to share credit information with a private credit bureau set up by global information technology services company, Experian. This aims to enable BNPL firms to consider a customer’s outstanding balances across other providers when conducting further credit assessments.

BNPL providers will also have to undergo an audit by an independent assessor to ensure their compliance with the Code. The SFA will assess if the firms are qualified for accreditation. If successful, a BNPL firm’s accreditation will be valid for three years, during which it can display an accredited Trustmark on its website and other collaterals.

Currently, six BNPL service providers - Ablr, Atome, Grab, LatitudePay, SeaMoney, and ShopBack - are operating under the Code in Singapore. All six have appointed PricewaterhouseCoopers (PwC) as the independent auditor for the first assessment.

To supervise and monitor Code compliance, an Oversight Committee (OC), made up of qualified and experienced members in the field, has also been formed to enforce guidelines set out by the Code.

“This has all been done with the protection of consumers in mind, to make sure those benefiting from using BNPL in Singapore can do so in a protected and trusted environment,” said Shadab Taiyabi, president of SFA.

“We look forward to BNPL firms’ successful accreditation and earning the Trustmark by April 2024, which will help consumers recognise firms that have implemented the Code fully,” said Andrew Tan, executive director (Prudential policy department), MAS. “The effective adoption of BNPL Code will improve consumer outcomes for BNPL users and mitigate risks of debt accumulation.”

The code came shortly after the Consumers Association of Singapore (CASE) called for stronger consumer safeguards in June 2022. CASE received 18 complaints involving BNPL service providers from 2021 to mid-2022, pertaining to technical issues with payments and consumers’ difficulty in seeking refunds, according to a blog post by Melvin Yong, president of CASE, at the time.

Yong said that BNPL services could lead to consumers spending more than they can afford to and making impulsive buys, due to a false perception of increased purchasing power.

"This happens in the credit card landscape, and can just as easily happen with the proliferation of BNPL services. While the Monetary Authority of Singapore stated that BNPL services currently do not pose significant risks of consumer indebtedness, I believe that we need to do more to shape the nascent BNPL scene," he added.

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