Malaysia’s financial landscape is undergoing a transformation with the rapid growth of Buy Now, Pay Later (BNPL) services. These services offer consumers a flexible payment option, allowing them to spread the cost of purchases over time.
A recent Charles Schwab Modern Wealth Survey revealed that approximately 14% of Malaysian adults had used a BNPL service by early 2023, highlighting the increasing popularity of this payment method. However, the lack of a specific regulatory framework for BNPL in Malaysia creates both opportunities and challenges for providers and consumers alike.
Dr. Wei Shan Lim, a Financial Analyst at University Malaya, emphasises the evolving needs of consumers. Traditional lending models are struggling to keep pace, creating a space for BNPL services to bridge the gap.
Opportunities for Financial Services Institutions (FSIs)
The BNPL trend presents a significant opportunity for Malaysian FSIs to enhance customer engagement and drive revenue growth. By incorporating BNPL options, FSIs can increase customer engagement by up to 30%, leading to higher average order values and more frequent purchases.
Millennials and Gen Z, known for their preference for flexible payment solutions, are particularly drawn to BNPL services. By targeting this demographic, FSIs can expand their customer base and foster loyalty. Furthermore, the data generated from BNPL transactions can provide valuable insights into consumer behaviour, enabling FSIs to refine their product offerings and cross-selling strategies.
Benefits of BNPL for the Broader Economy
Beyond the financial sector, BNPL can stimulate economic growth. By making purchases more affordable, it can encourage consumer spending, especially during economic downturns. Additionally, the integration of BNPL into online shopping platforms can contribute to the expansion of e-commerce in Malaysia.
Opportunities for Telcos
Telcos in Malaysia are well-positioned to enter the BNPL market. With access to vast amounts of customer data, including payment histories, usage patterns, and demographic information, telcos can contribute to more accurate credit scoring models. By analysing mobile usage patterns, they can also gain insights into consumer behaviour that can help predict repayment capabilities.
Learnings from Others
The success of Afterpay in Australia offers valuable lessons for the Malaysian market. Afterpay’s user-friendly interface, instant approval process, and focus on not affecting credit scores have been instrumental in its growth. The company has reported significant increases in customer retention rates, while merchants have experienced up to 30% boosts in conversion rates after implementing BNPL options.
Call to Action for FSI
To fully realise the potential of BNPL in Malaysia, collaboration between industry stakeholders is essential. A clear regulatory framework is needed to ensure fair practices and consumer protection. BNPL companies must prioritise user-friendly platforms and transparent disclosure of terms and conditions.
Local Success Story: Atome’s Expansion
Atome has successfully established itself as a leading BNPL player in Malaysia. By partnering with major retailers like Sephora and ZALORA, Atome has provided customers with flexible payment options both online and in-store. This approach has led to rapid growth for Atome, capturing a significant market share. Retailers have also benefited from increased average order values and repeat purchases.
Conclusion
The BNPL landscape in Malaysia is evolving rapidly, presenting significant opportunities for FSIs, telcos, and the broader economy. By understanding the market dynamics, leveraging data, and learning from global best practices, industry players can position themselves for success in this growing sector.