Who’s who in the buy now pay later sector that’s giving credit card players a headache

KUALA LUMPUR, July 4 — Thanks to the pandemic, the buy now pay later (BNPL) services sector is turning into a huge business.

Research and Market, which studies retail trends, estimated BNPL payments in Malaysia could double on an annual basis to reach RM2.65 billion in 2022.

This is huge considering the sector’s nascent age.

A key reason for its rapid growth is what makes credit cards appealing. But unlike credit cards, whose issuers vet your credit history for eligibility, BNPL platforms mostly don’t.

How does BNPL work? Simple. Instead of paying for a good or service in one sum, consumers who use these platforms get to break the payment into installments.

The payment scheme’s biggest bait is the fact that almost anyone qualifies for its service, unlike credit cards, which tend to have stringent requirements.

All you need to do is sign up, fill up some personal details and voila you’re all set to go — credit doesn’t come as easy, at least for now.

Trasy Lou-Walsh, general manager of Atome Singapore and Malaysia, one of the region’s biggest BNPL players, in an interview on BFM last year, sums up the industry’s modus operandi quite succinctly: “We were thinking of ways to disrupt the credit card industry.”

The lack of regulation has sparked concern about the risk of bad debt and default. Still, that hasn’t stopped more players from joining the competition.

To date, there are some one dozen domestic BNPL players, banks and established service providers such as PayPal included.

So with competition growing, what makes each of them different? We list down six of the most popular BNPL platforms and take a comparative look:

A customer scans a QR code for the Atome app to make a cashless payment at the shop in Shah Alam June 23, 2022. — Picture by Yusof Mat Isa

Atome

You’d probably have seen its yellow button marked with capital A on most online shopping platforms.

The Singapore-based firm is reportedly South-east Asia’s biggest BNPL platform today, with a presence in Singapore, Malaysia, Indonesia, Hong Kong, and Mainland China among others.

It boasts partnerships with over 2,000 retailers online and in-store merchants.

Lou-Walsh told BFM that Atome uses its “proprietary” credit score system using “advanced artificial intelligence” to vet users and determine what the user can or cannot afford.

But signing up for Atome is really easy, according to users from various income brackets whom Malay Mail interviewed recently. You just have to be 18 and above and spend a minimum of RM10 for a single purchase. Installments are spread out across three months.

Lou-Walsh said Atome doesn’t earn from interest charges on users but collects a certain fee from merchants instead. Users will also have to pay a RM30 penalty for any late payment.

Non-credit card holders get to spend up to RM1,500 while those with credit cards can buy anything up to RM5,000.

The FavePay and Atome app logos are displayed at the shop in Shah Alam June 23, 2022. — Picture by Yusof Mat Isa

FavePay Later

Fave calls itself a fast growing fintech platform that provides a smart payment application “for the smart generation of consumers to pay and save”.

Founded in 2015, Fave worked with merchants to offer discounted goods and services using something like a virtual coupon. Merchants get on the platform for what is essentially free advertising.

That extensive list of merchants on its network primes Fave to leverage on its system for an in-house BNPL payment service, so FavePay Later was eventually rolled out as recently as 2021.

Like most BNPL platforms, FavePay Later's installment tenure is three months. How much credit a user can use depends on what the firm calls “user assessment” even as signing up for the service appears to be relatively easy, and without any requirement for a positive credit score.

Fave charges 1.5 per cent of the sum the users still owe for every late payment after seven days.

The Hoolah and Atome app logos are displayed at the shop in Shah Alam June 23, 2022. — Picture by Yusof Mat Isa

hoolah

Another Singapore-based BNPL platform made popular by the pandemic.

Like Atome and FavePay Later, hoolah’s installment tenure is three months. However, the provider imposes a tiered late payment charge based on the price of the items bought. Installments are also interest-free, similar to Atome and Fave.

For orders under RM100, a penalty of RM7.50 would be imposed. For a transaction between RM100 to RM499.99 the penalty will be RM25. For any transaction that is RM500 and above, the penalty fee will be RM75, hoolah told Malay Mail today.

hoolah is less well known in Malaysia compared to competitors like Atome or Fave, but is huge in Singapore.

Its general manager Jason Wong told Bernama in an interview last year that hoolah saw a 600 per cent surge in order volume from May 2020 until May 2021.

Grab PayLater

Grab, popular for its ride sharing and food delivery services, launched its own BNPL payment option in 2019, which is slightly different from what other BNPL payment providers offer — it lets you break a single payment into either four installments, or you can opt to pay the entire sum in the month after.

Because Grab started out as a logistics provider, PayLater can be used to pay for food, e-hailing rides, and groceries. Of course Grab also partners with known online shopping merchants such as Zalora.

But to use Grab’s PayLater service, users have to meet certain requirements, although they’re still less strict compared to those set for credit card applications.

A customer scans a QR code for the Atome app to make a cashless payment at the shop in Shah Alam June 23, 2022. — Picture by Yusof Mat Isa

The BNPL option is only available for those above 21 years old, and you have to be what it calls a “silver tier” member, that is a user must first accumulate at least 200 GrabReward Points.

Users must also make a minimum of three transactions on the app in the recent month.

As for late payment, Grab would immediately freeze a PayLater account for each missed installment. The penalised user would have to pay RM10 to reactivate the account.

Shopee’s SPayLater

Shopee came into the BNPL game quite late which explains why its own SPayLater option is still relatively unknown to many despite boasting huge sales volumes that reflect how popular the online shopping platform is among consumers.

Not much is known about how it filters out risky users but Shopee reportedly has its own way of assessing credit scores. The BNPL option is supposedly available only to a select group of Shopee users.

Shopee’s BNPL service offers two repayment methods almost similar to Grab’s PayLater, but installments can be deferred across two, three or six months.

Like its competitors, Shopee said the installment options are interest free BUT it charges 1.25 per cent of the order sum for “processing” fee.

If you pay late, a penalty at 1.5 per cent of the transaction sum will be charged.

Split

We list Split because it claims to be the first “Shariah-compliant” BNPL platform in the country despite it being much less known relative to other bigger players.

But Split could be an attractive option to consumers because it appears to be the only deferred payment provider that doesn’t charge late payment penalties.

Instead the Malaysian-based payment provider said it would work out a payment plan that suits the user who can’t pay on time on a case-to-case basis, of course subject to “verification”.

The company’s founders claimed that the application for the plan is so strict that the rate of rejection is far higher.

Installment tenure is three months interest-free. Split told The Vulcan Post it monetises by charging the store a success fee, typically under 10 per cent depending on monthly sales from their partner stores.

*Editor's note: Penalties on hoolah have been revised to reflect the latest information provided to Malay Mail today.