Who’s Who in the Buy Now Pay Later Business That’s Giving Credit Card Players a Headache

KUALA LUMPUR, July 4 — Thanks to the pandemic, the Buy Now Pay Later (BNPL) services industry is turning into a huge business.

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

This is huge considering the nascent age of the sector.

One of the main reasons for its rapid growth is what makes credit cards attractive. But unlike credit cards, whose issuers check your credit history for eligibility, BNPL platforms generally do not.

How does BNPL work? Simple. Instead of paying for a good or service in one lump sum, consumers using these platforms can split the payment into multiple installments.

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

All you have to do is sign up, fill in some personal information, and voila – getting credit isn’t that easy, at least for now.

Trasy Lou-Walsh, managing director of Atome Singapore and Malaysia, one of the largest BNPL players in the region, in an interview on BFM last year, summarized quite succinctly the modus operandi of the industry: “We were thinking to ways to disrupt the credit card industry.”

The lack of regulation has raised concerns about the risk of bad debts and payment default. Still, that hasn’t stopped more players from joining the competition.

To date, there are a dozen national BNPL players, banks and established service providers such as PayPal included.

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

A customer scans a QR code for the Atom app to make a cashless payment at Shah Alam’s shop on June 23, 2022. – Image by Yusof Mat Isa

Atom

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

The Singapore-based company is said to be the largest BNPL platform in Southeast Asia today, with a presence in Singapore, Malaysia, Indonesia, Hong Kong and mainland China, among others.

It benefits from partnerships with more than 2,000 online retailers 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 Atom is really easy, according to users of different income brackets who malaysian mail recently interviewed. You just need to be 18+ and spend a minimum of RM10 on a single purchase. Payments are spread over three months.

Lou-Walsh said Atome does not collect interest charges from users, but rather collects some fee from merchants. Users will also have to pay a penalty of RM30 for any late payment.

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

FavePay and Atom app logos are displayed in Shah Alam's store on June 23, 2022. – Photo by Yusof Mat Isa

FavePay and Atom app logos are displayed in Shah Alam’s store on June 23, 2022. – Photo by Yusof Mat Isa

FavePay Later

Fave calls itself a fast-growing fintech platform that provides a smart payment app “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 access the platform for essentially free advertising.

This long list of merchants on its network prompts Fave to leverage 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 duration is three months. The amount of credit a user can use depends on what the company calls “user rating,” although signing up for the service appears to be relatively easy and with no requirement for a positive credit score. .

Fave charges 1.5% of what users still owe for each late payment after seven days.

The Hoolah and Atom app logos are displayed in Shah Alam's store on June 23, 2022. – Image by Yusof Mat Isa

The Hoolah and Atom app logos are displayed in Shah Alam’s store on June 23, 2022. – Image by Yusof Mat Isa

whoop

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

Like Atom and FavePay Later, the duration of hoolah installments is three months. However, the supplier imposes a late payment fee scaled according to the price of the items purchased. Installments are also interest-free, like Atom and Fave.

For orders less than RM300, a penalty of RM16 would be imposed. For a transaction between RM301 and RM3000, the penalty will be around RM47. The penalty rate will increase to approximately RM95 for any transaction above this latter amount.

hoolah is lesser known in Malaysia compared to competitors like Atom or Fave, but is huge in Singapore.

Its managing director Jason Wong told Bernama in an interview last year that hoolah had seen a 600% increase in order volume from May 2020 to May 2021.

Enter 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 split a single payment into four installments, or you can choose to pay the full amount in the following month.

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

But to use Grab’s PayLater service, users must meet certain requirements, although they’re even less stringent than those set for credit card apps.

A customer scans a QR code for the Atom app to make a cashless payment at Shah Alam's shop on June 23, 2022. - Image by Yusof Mat Isa

A customer scans a QR code for the Atom app to make a cashless payment at Shah Alam’s shop on June 23, 2022. – Image by Yusof Mat Isa

The BNPL option is only available to people over the age of 21, and you must be what it calls a “silver level” member, i.e. a user must first accumulate at least 200 GrabReward points.

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

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

Shopee SPAyLater

Shopee came quite late to the BNPL game, which is why its own SPayLater option is still relatively unknown to many despite huge sales volumes that reflect the online shopping platform’s popularity with consumers.

Not much is known about how it screens risky users, but Shopee is said to have its own way of assessing credit scores. The BNPL option is only meant to be available 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 for two, three, or six months.

Like its competitors, Shopee said the installment options are interest-free BUT it charges 1.25% of the order amount for a “processing” fee.

If you pay late, you will be charged a penalty of 1.5% of the transaction amount.

Divide

We are listing Split because it claims to be the first “Sharia-compliant” BNPL platform in the country, although it is much lesser known compared to other bigger players.

But Split could be an attractive option for consumers as it appears to be the only deferred payment provider that does not charge late payment penalties.

Instead, the Malaysia-based payment provider said it would work out a suitable payment plan for the user who cannot pay on time on a case-by-case basis, of course subject to “verification”.

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

The duration of the payments is three months without interest. Split says The Vulcan Post it monetizes by charging the store a success fee, usually less than 10% based on monthly sales from their partner stores.