BNPL Transactions In Msia Hit RM7.1 Bln, AKPK Highlight Debt Risks

The Credit Counselling and Debt Management Agency (AKPK) has introduced the 3P formula (Purpose, Payment Capacity, and Payment History) to help individuals make responsible credit decisions, especially with regards to short-term financing such as Buy Now, Pay Later (BNPL).

In a recent statement, AKPK reiterates its commitment to helping individuals gain the knowledge and tools needed to manage their finances responsibly in order to avoid excessive debt.

3P guide: Purpose, Payment Capacity and Payment History

Under Purpose, AKPK emphasises the importance of borrowing sustainably to fulfill needs and gain benefits in the long-term. It should not be solely on satisfying temporary wants or impulsive lifestyle choices.

Payment Capacity guides individuals to borrow according to their affordability, rather than based on eligibility offered by financial institutions. As for Payment History, AKPK stresses the importance of maintaining an up-to-date record of repayments. By having a clear history of meeting all payment obligations, individuals will be able to more easily secure favourable financing terms.

Individuals seeking financial assistance are urged to assess their income, expenses and existing debt obligations in order to determine their ability to repay before using BNPL schemes.

Risk of overspending and debt accumulation

AKPK also acknowledges the potential risks associated with BNPL schemes where the ease of purchase can hide the potential long-term financial implications.

Finance Minister Datuk Seri Amir Hamzah Azizan informed Dewan Rakyat that the first half of 2024 saw a massive surge of BNPL transactions, approaching nearly 45 percent.

AKPK’s CEO, Azaddin Ngah Tasir, also mentions that AKPK research showed three out of ten consumers, especially those under 40 years old, exhibited compulsive spending habits, thus resulting in higher financial distress.

As such, AKPK highly advises individuals to only seek out BNPL if they are certain that they can meet all the payment deadlines to avoid incurring additional fees and interest charges.

The organisation also offers financial advisory services that can help with budgeting and debt management. AKPK also provides free financial education, including online modules to help individuals make informed decisions with regards to their finances.