The allure and dangers of 'buy now, pay later'

You could end up in debt if you don't keep track of your expenses and pay bills on time

- Sue-Ann Tan

I was in a department store buying clothes that cost about $30 a couple of years ago when a sales agent came up and promised me a discount if I used an app to pay for the outfit.

It was only after I had downloaded it that I realised it was an app for "buy now, pay later", otherwise known as BNPL.

The app offered to split my $30 payment over a few months.

I declined because $30 was not a big enough expense for me to consider paying in instalments.

However, such services have gained traction even for smaller, everyday purchases like clothes and shoes.

Singapore consumers spent $3.4 billion online and in-store using BNPL services from third-party providers such as Atome and Grab PayLater, banks and retailers in 2023.

Members of Gen Z, those aged between 18 and 24, and young millennials aged between 25 and 34, were among the bigger BNPL users, noted the Worldpay's 2024 Global Payments Report.

BNPL is attractive because it offers consumers the option of paying in instalments without interest.

Even people without a credit card can use BNPL, which makes it even more appealing to younger consumers who might not have high credit ratings or credit-worthiness.

The thought of breaking up a purchase that is less than $100 into small parts to be paid off monthly makes me baulk.

Perhaps it is because I'm the type of person who wants to pay everything at one go - even my insurance premiums and income tax - rather than in instalments.

But for larger purchases, especially if my budget may be tight, I realise that BNPL might be a very alluring proposition.

Among those who could benefit from BNPL are gig workers and people who have just entered the corporate world, said OCBC head of wealth advisory Aaron Chwee.

"These individuals typically have only debit or ATM cards and limited access to credit. BNPL, therefore, is able to bridge this gap."