I, for one, have been vocal about Buy Now Pay Later (BNPL). I mean, what’s not to talk about when news about this fast-approval loan has often felt like sour milk?

KFC, for instance, brought finger-lickin’ debt to the table at a time when 877 young Malaysians aged 18 to 40 faced bankruptcy in 2024, up from 727 the year before.

When BNPL first entered the market, it felt like a promising tool.

One that could give people without access to traditional credit a bit more breathing room. Some might argue that it is too easy, that, in return, some people might turn up abusing it.

But when Malaysia’s Ministry of Finance recently disclosed that more than 70% of Buy Now, Pay Later users come from the B40 income group, a detail that shifts the entire conversation.

Convenience now looks very different when it is relied on by households with the least financial slack, am I right?

You see, BNPL is often discussed as a fintech convenience, a flexible payment option for digital natives or an alternative to credit cards.

But when its largest user base is made up of lower-income households, and when it is increasingly used for food, groceries and transport, the product begins to look less like a lifestyle tool and more like financial infrastructure for day-to-day survival.

That shift is at the heart of why BNPL has drawn closer scrutiny in recent months, even as official indicators suggest the sector remains under control.

What RM21.3 Billion In Transactions Doesn’t Tell Us

According to Bernama, Buy Now Pay Later transactions in Malaysia reached RM21.3 billion in 2025 across 243 million transactions.

Outstanding BNPL loans now stood at RM4.9 billion at year-end, or about 0.3% of total household debt.

Overdue loans remained relatively low at RM160.2 million, representing 3.3% of total BNPL lending, a figure the government has described as manageable.

Judging by the numbers alone, there appears to be little immediate cause for concern.

Yes, BNPL is growing at an exponential rate, but it still accounts for a relatively small share of household debt, and default rates remain contained.

The detail that complicates this picture however, is the average transaction size.

At just RM91, BNPL spending in Malaysia looks less like a discretionary consumption and more like short-term borrowing to cover everyday needs.

Bernama’s data supports his statement. In the news, it states that most BNPL usage goes towards essentials such as food, groceries, transport and basic services.

Which, it all suggests my hypothesis that credit is increasingly being used to bridge routine cash-flow gaps rather than to finance occasional purchases.

BNPL as a Coping Mechanism

When unsecured credit is routinely used to pay for necessities, it signals a deeper issue than consumer overspending.

It points to households operating with little financial buffer, where income timing and cost-of-living pressures do not align. And this is where BNPL’s appeal becomes clearer.

For many in the B40 group, access to traditional credit remains limited.

Credit cards require income thresholds, stable employment, and formal documentation that not all workers can meet. BNPL, by contrast, offers near-instant access with minimal friction.

Mr Money has also described this ease of access as a double-edged sword.

In a voice note shared in recent discussions on BNPL, he acknowledged that such “indiscriminate” credit can serve a real purpose for those who are financially excluded.

When an emergency hits and there is no card to swipe, BNPL can provide temporary relief.

The problem emerges when emergency tools become routine tools.

The Hidden Cost Behind “Interest-Free”

BNPL is typically marketed as interest-free, a positioning that distinguishes it sharply from credit cards in the minds of consumers.

But that framing often obscures what happens when payments are missed.

Mr Money has pointed out that once late fees, processing charges and reactivation costs are factored in, the effective cost of missed BNPL payments be very high.

“[When it comes to the interest rate they charge], I think it’s exorbitant,“ he said. “Sometimes, based on calculation, if you miss your payments, it can come up to about 30% [or even higher] which is crazy … That is [one] part that I don’t like [about BNPL].”

These are not annual interest rates in the traditional sense, but the impact on small balances can be severe.

For a B40 household using BNPL for RM91 worth of groceries, a fixed late fee represents a disproportionately large burden.

The smaller the transaction, the higher the effective cost of slipping up.

So, this creates what some analysts describe as a “poverty premium”, where lower-income users pay more, not because they borrow more, but because they have less margin for error.

Financial Inclusion or Financial Exposure?

But what does he mean by this?

Well, much of the BNPL debate sits on a fine line between financial inclusion and financial risk.

On one hand, BNPL has undeniably widened access to credit. It reaches users who are unbanked or underbanked, and it does so without the stigma often associated with loans.

On the other hand, ease of access without robust affordability checks raises questions about who ultimately bears the risk.

And Mr Money has repeatedly returned to the idea that credit is being extended too easily.

In his view, access alone should not be the goal if it comes without safeguards that match a user’s ability to repay.

When more than 70% of users are from the B40 group, the margin for miscalculation is thin.

What begins as inclusion can quickly turn into overexposure, especially when BNPL shifts from a short-term fallback into a recurring monthly habit.

BNPL Limits That Grow Faster Than Income

Beyond user behaviour, BNPL risk is increasingly shaped by product design and algorithms.

Mr Money has also shared a personal example where his Shopee Pay credit limit rose from RM1,000 to RM6,000 without him applying for an increase.

“I noticed … my Shopee Pay Later was given like RM1,000 credit [at first] … and I don’t use it [But] recently, [I checked again, and was] given RM6,000. I never even applied for the more credit. So I feel like credit should not be given so easily… because [it is] too dangerous.”

While such adjustments may seem benign for higher-income users, the implications are far more serious for lower-income households.

Automatic credit limit increases expand spending capacity without a corresponding rise in income.

If you’re not financially literate nor have the discipline of a monk, these credit limit increases encourage higher usage while quietly increasing the potential fallout when repayments falter.

Importantly, these increases often occur without explicit user consent or clear explanation.

In a system driven by data and engagement metrics, these risks can scale invisibly.

The Safeguard That Cuts Both Ways

One feature Mr Money has defended is BNPL’s built-in “hard stop”. Which is when you miss a payment, and the account is frozen. And I somewhat agree with him.

Unlike credit cards, where minimum payments can keep debt rolling indefinitely, BNPL forces a pause.

In theory, this acts as a safeguard, preventing debts from snowballing. But in practice, well, the effect is a bit more complex.

When BNPL is used for essentials, a frozen account does not just mean losing access to credit. It can disrupt daily routines, from commuting to buying groceries.

The pressure to stay current becomes intense, particularly when alternatives are limited.

And it seems like the same mechanism that limits debt growth can also compel repayment at any cost.

This dynamic may also help explain why BNPL default rates remain low.

A 3.3% overdue rate suggests discipline and control. But behavioural finance tells a more nuanced story.

Users may prioritise BNPL repayments precisely because losing access carries immediate consequences. Be it rent, utilities or even informal debts may be delayed instead.

Low defaults, in this context, may reflect fear of disruption rather than financial comfort.

A Mirror, Not the Root Cause

BNPL did not create Malaysia’s cost-of-living pressures, nor did it cause wage stagnation or household fragility.

What it does is expose them.

That framing echoes how Mr Money has described BNPL elsewhere, as a “band-aid” rather than a solution.

It offers short-term relief at the checkout, but it does little to address the underlying pressures that made households reach for instalments in the first place.

When a majority of BNPL users come from the B40 group, and when the average transaction is barely RM91, the product becomes a mirror reflecting how stretched many households have become.

It is not propping up discretionary spending, but patching over gaps in everyday cash flow.

The question, then, is not whether BNPL should exist. Because I feel like it’s still needed.

What we should focus now is about how its risks are distributed, how transparently costs are communicated, and how safeguards are designed for those who rely on it most.

After all, a band-aid can stop the bleeding, but it doesn’t always tell you how deep the cut really is.