With Singapore moving towards a cashless society and the increased use of e-commerce websites, Buy Now, Pay Later (BNPL) schemes have been growing in popularity in recent years. BNPL providers have agreed to comply with certain standards to protect consumers and promote responsible lending.
A typical BNPL transaction allows customers to purchase goods or services upfront but pay for them in regular instalments. Another BNPL option enables customers to defer full payment for goods or services until a later date. In both cases, the BNPL provider pays the merchant on the customer’s behalf, repayments to the BNPL provider are automatically deducted from the customer’s bank account or debit card and interest is not charged unless a repayment deadline is missed.
BNPL transactions grant customers the flexibility to buy even high-priced items without upfront financial strain. However, BNPL schemes can lead to impulse spending and debt mismanagement.
There is no Singapore law regulating BNPL at this time. However, to mitigate overspending risks, ensure fair dealing and safeguard consumers, the Singapore FinTech Association (SFA) and BNPL industry players, under the guidance of the Monetary Authority of Singapore (MAS), developed the Buy Now, Pay Later Code of Conduct (Code) in October 2022.
While compliance with the Code is voluntary, existing BNPL providers had until 1 November 2023 to comply with the Code and until 31 March 2024 to complete an audit and accreditation process to ensure compliance with the Code. Accredited BNPL providers can display a trustmark for 3 years. New providers should also comply with the Code before offering BNPL services in Singapore.
A qualified and experienced independent oversight committee is responsible for investigating suspected breaches of the Code by accredited BNPL providers.
BNPL providers have committed to comply with the following industry best practices outlined in the Code:
It remains to be seen if BNPL schemes will be subject to legislative requirements. MAS is monitoring this sector and will assess its regulatory framework as needed.
The Code is a crucial initiative that promotes responsible lending and safeguards consumer interests. By promoting debt management and fair dealing, the Code helps consumers make informed decisions and maintain financial stability. Because regulation of the BNPL sector is evolving, BNPL players should continually monitor legal developments in this area.
OrionW regularly advises clients on FinTech matters. For more information about FinTech regulatory compliance, or if you have questions about this article, please contact us at fintech@orionw.com.
Disclaimer: This article is for general information only and does not constitute legal advice.
