Introduction
The rapid expansion of Buy Now, Pay Later (BNPL) services has transformed the global consumer credit landscape, offering an alternative to traditional credit cards and instalment loans. While BNPL provides financial flexibility, it also raises concerns about consumer protection, debt accumulation, and regulatory oversight. Governments worldwide have taken varied approaches to regulating BNPL, with some implementing stringent measures while others rely on industry self-regulation.
BNPL is a type of short-term financing that enables consumers to purchase goods and services immediately, deferring payment through scheduled instalments that are often interest-free. BNPL is becoming an increasingly popular payment option worldwide, driven by growing demand for more accessible and seamless credit and a surge in online shopping. In 2022, the global BNPL market size stood at USD6.2 billion and is estimated to reach USD38.6 billion by 2030 at a CAGR of 26.1% over the 2023-2030 forecast period. In Malaysia, the BNPL market is expected to grow at a CAGR of 10.9%, reaching USD4.2 billion in 2030.
Despite its increasing significance, the regulatory landscape for BNPL remains a patchwork of approaches. Countries have adopted varying regulatory stances, ranging from stringent oversight to a more laissez-faire approach. In some jurisdictions, BNPL is treated under existing consumer credit laws, requiring providers to adhere to credit licensing, conduct assessments, and disclosure requirements. In many others, however, BNPL operates in a grey area, not fully encapsulated by traditional financial regulations due to its unique structure and short-term credit model.
In Malaysia, the Consumer Credit Bill (CCB) was tabled for its first reading at the Parliament by the Ministry of Finance (MOF) on 4 March 2025. Once enforced, the Consumer Credit Act (CCA) will provide a comprehensive and integrated regulatory framework for the credit industry, which includes the oversight of BNPL providers. Against the backdrop of rising BNPL usage, with transactions increasing by 44.9% from RM4.9 billion in the first half of 2024 to RM7.1 billion in the second half of 2024, and users particularly consisting of the B40 group, the tabling of the CCB is timely.
As with any credit system, BNPL carries inherent risks, including the potential for consumer overindebtedness and data privacy concerns, amongst others. Consequently, the need for a coherent and comprehensive regulatory framework is pertinent to ensure adequate consumer protection, promote fair and transparent lending practices, and maintain overall financial stability.
This article briefly examines BNPL regulations in different countries and provides a snapshot of Malaysia's ongoing efforts to regulate this fast-growing sector.
BNPL Regulatory Landscape in Other Countries: An Overview
The regulatory response to BNPL has been diverse, with various initiatives to enhance regulation in motion. In some jurisdictions, BNPL is treated as a financial product and is subject to existing credit laws while in others, regulators have struggled to fit BNPL into traditional regulatory frameworks, leading to calls for new legislation specifically addressing the innovative payment option.
In the EU, the approach undertaken to regulate BNPL services remains fragmented, with no unified regulatory framework explicitly addressing BNPL. Traditional EU financial regulations like the Consumer Credit Directive (CCD) and the Payment Services Directive (PSD2) only partially cover aspects of BNPL transactions. This has led to a regulatory grey area, where BNPL providers operate under less stringent requirements compared to traditional credit lenders. Consultations and reviews are, however, underway to ensure the introduction of new oversight rules to protect consumers against inherent risks.
Similarly in the US, BNPL regulation is fragmented across states. States have begun applying existing lending laws to BNPL products albeit with significant variation in scope and enforcement. Some states have specific regulations that apply to BNPL, while others rely on general consumer credit laws. Federal agencies like the Consumer Financial Protection Bureau (CFPB) have started to take a closer interest in the sector but specific regulations governing BNPL services are still in their developmental stage.
Across Asia, the regulatory landscape is diverse, reflecting the region's economic and cultural heterogeneity. In markets like Singapore where BNPL has seen rapid growth, the regulation of consumer credit is piecemeal where several legislations exist (e.g. Moneylenders Act, Hire Purchase Act, Pawnbrokers Act). At present, Singapore has adopted a “light-touch” approach to the regulation of BNPL, with the Singapore Fintech Association (SFA) alongside other BNPL players, taking on an industry-led initiative through the formulation of the BNPL Code of Conduct under the guidance of the Monetary Authority of Singapore (MAS). Other countries, such as Vietnam, continue to deliberate the appropriate regulatory framework for BNPL, balancing the need for financial inclusion with risk management.
At the forefront of BNPL regulation is Australia amid growing concerns over consumer debt, which led to the Australian government’s introduction of regulatory changes. In June 2023, the Australian Treasury proposed a regulatory framework to bring BNPL services under stricter consumer credit regulations. The proposed changes require BNPL providers to conduct mandatory credit checks, ensure affordability assessments, and comply with responsible lending obligations. Additionally, BNPL providers must obtain an Australian Credit License (ACL) and adhere to stricter fee transparency requirements, preventing hidden costs and excessive charges. The regulatory overhaul aims to align BNPL services with traditional credit products, ensuring better consumer protection, reducing financial distress, and fostering responsible lending in the rapidly growing sector.
BNPL Regulatory Landscape in Malaysia
The consumer credit regulatory landscape in Malaysia is fragmented, akin to trends observed around the world, with various regulators overseeing multiple laws governing consumer credit activities. Currently, BNPL schemes may fall under the purview of existing consumer credit laws, but it is not definitively regulated.
However, Malaysia has recognised the rapid expansion of BNPL services and the need for regulatory oversight. On 4 March 2025, the CCB was tabled for its first reading at the Parliament by the MOF. Once the bill is passed, the Consumer Credit Act (CCA) will be enacted. The Consumer Credit Bill aims to enhance the protection of credit consumers, including BNPL users, by regulating credit businesses and credit service businesses, ensuring proper conduct and responsible lending practices by the credit industry, and promoting a fair, efficient, and transparent credit industry. The enactment of the Bill will be driven by the MOF, BNM, and the SC, with support from KPDNHEP, KPKT, the Ministry of Entrepreneur and Cooperatives Development (KUSKOP), and SKM.
According to the second public consultation paper issued by the CCOB Task Force in April 2023, there will be three phases in transforming the regulatory landscape of consumer credit in Malaysia to facilitate a smooth transition and minimise unintended disruptions in the consumer credit industry.
While the full implementation of the CCA is still in progress, the enactment of the Act marks a pivotal step towards strengthening the overall regulatory framework within Malaysia’s consumer credit sector, particularly at a time of high debt levels amongst consumers and households.
Final Thoughts
Based on the prevailing landscape of BNPL regulations in other countries, it is evident that further progress is required to ensure sufficient consumer protection and market stability. While it is recognised that BNPL, as a hybrid of technology and traditional credit systems, has reshaped consumer spending patterns, the innovative credit option has outpaced the development of a cohesive regulatory framework. Without appropriate oversight, BNPL can pose risks such as encouraging consumer over-indebtedness, issues of data privacy, and the potential for unfair lending practices. Therefore, regulation is critical in mitigating these risks, ensuring transparency in lending terms, and protecting consumers from potential financial harm.
As we move forward, the BNPL industry, regulatory bodies, and consumers alike must navigate this evolving landscape with a keen awareness of both the benefits and challenges presented by this novel form of credit. The future of BNPL regulation will likely involve a more harmonised approach, balancing consumer protection with the dynamism of financial technology. A well-regulated BNPL market is essential to balancing financial innovation with consumer protection, ensuring that BNPL remains a tool for financial empowerment rather than a source of overindebtedness.
