UNAIR NEWS – The use of buy now, pay later (BNPL) feature spreads rapidly. Fintech companies first developed the feature and have now expanded to medium and large-scale banking corporations. Most recently, PT Bank Central Asia Tbk (BCA) and PT Bank Mandiri (Persero) Tbk launched their BNPL features by the end of 2023. Soon afterwards, PT Bank Negara Indonesia Tbk (BNI) is also preparing to tap into this market segment by launching a similar feature.

Sharia, an economy expert from the Faculty of Economics and Business Universitas Airlangga Bayu Arie Fianto SE MBA PhD, believed that the trend would potentially boost the country’s economic inclusion.

The BNPL feature in banking is somewhat more accessible, as the customers can obtain a credit limit of up to tens of millions without applying for a credit card or collateral. Though the BNPL offers unparalleled convenience, Bayu reminded customers to improve their financial literacy and collect an emergency fund equivalent to six times their daily or monthly expenses before using BNPL.

Ideally, BNPL users should have ‘cold cash’ for long-term investments and assess their repayment capacity to avoid the risk of late payments. To prevent installment arrears, Bayu suggested opting for a longer tenor to reduce the amount of each installment and to use available discounts.

“I suggest using the feature for its convenience. For those considering the BNPL option, especially the ones with QRIS, it’s important to assess your financial capabilities carefully,” he said.

Customer’s risk

Furthermore, Bayu warned about the BNPL feature. “The feature essentially functions like taking out a loan or incurring a debt from a bank, requiring the user to repay it. Most people enjoy the benefits of the loan but overlook their repayment responsibilities. Failing to pay results in being blacklisted by the bank, which could impact future credit applications,” he said.

He explained how user credibility diminishes due to irresponsible usage of the BNPL. “The risk involves trust. However, banks offering BNPL are the conventional ones so far. It seems that Islamic banks haven’t introduced pay-later features,” he said.

The condition could lead to wasteful behavior. “This is highly advantageous for the banking culture. However, it encourages wasteful behavior in society, particularly for those who lack financial literacy. If not careful, one could fall into debts that disrupt family cash flow,” he said.

Economic inclusion

Despite the risks, Bayu believed the feature would stimulate the investment rate due to the surge in Indonesian market share. “Nowadays, public shopping activities are increasing thanks to faster and more efficient payment transactions. Many foreign and local companies are looking to invest in Indonesia. Investments in technology and the financial sectors are set to rise, which will boost Indonesia’s macroeconomic finance,” he said.

With the massive use of e-money, Bayu believed that the BNPL could promote economic inclusion. However, there is a need for improvement in the use of user interface (UI) and user experience (UX) in mobile banking to make it more accessible to the public.

He suggested Muslim customers use the Sharia-based pay later service released by financial institutions like fintech. Economic inclusion will be achieved if financial institutions release a similar feature based on Sharia.

“So far, there hasn’t been any Sharia-based BNPL service issued by Islamic banks. A Sharia-based service can expedite the inclusion of the country’s economy. For instance, Sharia-based credit card services as Islamic banks earn profits through ujrah. I highly recommend launching Sharia-based pay later services by financial institutions,” he said.

Author: Aidatul Fitriyah

Editor: Khefti Al Mawalia