Itching to buy an item on your wishlist, but it’s not payday yet? Hey, there’s a solution to your shopping dilemma! Why not buy now, pay later? Buy now, pay later (BNPL) services have become a popular and convenient way to manage finances in Malaysia. But what exactly is BNPL, and how does it work?

The Concept of Buy Now, Pay Later Explained: Definition and How it Works

At a glance, the buy now, pay later service works almost like a credit card payment. It’s a type of instalment plan that allows you to split your purchases into smaller, more manageable payments that you pay each month. This can be particularly helpful for larger purchases that you might not want to pay for upfront. However, keep in mind that not all BNPL providers have the same system and regulations. Some may charge interest and late payment fees, while others may be more lax. But they all share the same DNA; BNPL is accessible via a mobile app.

BNPL is primarily available in e-commerce though you may also find it in physical stores. During checkout, you can choose the pay later option. You will be asked to fill in a short form that details your personal information. Within seconds, the system will do a soft credit check and approve your transaction. Once it’s done, all you have to do is pay the first instalment at the cashier.

For example, you’ve decided to buy running shoes for RM 450. Using a pay later app, your purchase is divided into three instalments, and you have to pay RM 150 per month. At the checkout, you must pay RM 150 as the first instalment. This means that you’ll have to pay RM 150 the next month and another RM 150 the following month. The transaction is complete, and you get to bring home a new pair of shoes.

Now that you understand the definition of buy now, pay later, let’s move on to the following sections which cover its pros and cons.

Pros and Cons of BNPL

Buy now, pay later services can be a convenient alternative payment option for customers but is it safe to use it for every transaction? Like any financial product, BNPL services have both pros and cons to consider. Before you jump on the BNPL bandwagon, let’s explore both sides of the coin.

The Pros of BNPL:

  1. Makes shopping easier: You can buy now and pay later if you’re short on cash. Since these services are often interest-free, you really have nothing to lose. Just remember to pay your monthly instalments and you’re all set!
  2. Fast approval process: It only takes seconds. The registration process is also swift and easy to follow. You only need a few info/documents: your identity card, phone number, and bank account.
  3. An alternative to credit cards: There is no need to worry about your credit score as BNPL providers don’t typically do credit checks. Unlike credit cards, you also won’t be charged with annual fees.
  4. Auto charge feature: BNPL providers usually set an auto-charge feature where they automatically deduct the payment from your registered bank account so you’ll never forget to make a payment. This can be convenient, but be sure to monitor your account to avoid insufficient funds.

The Cons of BNPL:

  1. Encourages impulse buying: You may be tempted to spend money that you don’t currently have. If you tend to buy things that you don’t necessarily need, you may want to rethink your decision to use this service.
  2. Debt accumulation: Some BNPL providers charge late fees or other charges. Be sure to understand the fees associated with using a particular service before signing up. It’s also important to only use BNPL for purchases you can afford to repay within the specified timeframe to avoid snowballing your debt.
  3. May impact your credit score: While BNPL doesn’t have a direct impact on your credit score, many loan providers will include your payment history as part of their due diligence when determining loan eligibility.
  4. Not universally accepted: Not all merchants accept BNPL payments.

Popular BNPL Options in Malaysia

Now that you understand the pros and cons of buy now, pay later services, you might be curious about the options available in Malaysia. Here are some of the leading BNPL providers:

  • Atome: One of the largest BNPL providers in Asia. Atome partners with over 2,000 retailers across various categories like Zalora, Agoda, Sephora, and Starbucks. They offer flexible payment plans with minimal fees.
  • SPayLater by Shopee: This service is particularly well-suited for online shopping enthusiasts, especially those who frequently use the e-commerce platform. However, do note that SPayLater may charge a processing fee for your purchases.
  • Grab PayLater: Offered by the popular ride-hailing app Grab, PayLater provides a four-month instalment plan, making it a convenient option for managing larger purchases or spreading out daily expenses.

Choosing the Right BNPL Provider for You

With several BNPL providers in Malaysia, it’s important to choose one that best suits your needs. Here are some factors to consider:

  • Merchant acceptance: Check if the BNPL provider is accepted at the stores or online retailers you frequent.
  • Fees and interest rates: Compare the fees and interest rates associated with each service. Some BNPL providers offer interest-free payments, while others might have processing fees or late payment charges.
  • Payment terms: Consider the repayment terms offered by each provider. Some might offer short-term instalments, while others might allow for longer repayment periods.

Remember: BNPL can be a helpful tool for managing your finances, but it’s crucial to use it responsibly. Always prioritise paying your instalments on time to avoid accumulating debt and potential negative impacts on your credit score.

BNPL might not be the right fit for everyone. Funding Societies Malaysia offers a wealth of informative blog posts on personal finance, budgeting, financing for SMEs, and alternative payment options. Explore our blog section to find helpful tips and strategies to manage your finances effectively! 

As a financial tool, BNPL services have their own limitations. Funding Societies Malaysia offers a variety of financing solutions that cater to diverse financial needs. Check out our SME financing products today to discover an alternative financing solution that fits your unique business goals.

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