Consumer debt in Indonesia from Buy Now, Pay Later (BNPL) schemes has risen to 6.13 trillion rupiah as of March 2024, an increase of 23.9% from the previous year, indicating a growing trend of using such services. The ease of access to BNPL services compared to traditional credit cards has contributed to this surge, making it easier for consumers to access credit without upfront payments. BNPL functions as a short-term financing option, allowing users to make purchases and defer payments, which has been a popular choice for many consumers in Indonesia and the wider Southeast Asia region.
The projected market growth for BNPL in Southeast Asia is expected to reach US$33.6 billion by 2027, according to a report by Singapore’s Lee Kuan Yew School of Public Policy. The region’s combination of a large unbanked population and increasing internet accessibility makes it a fertile ground for BNPL players, driving the popularity of such services. However, concerns have been raised about unregulated BNPL services leading consumers to accumulate debt beyond their means, particularly among younger generations like Gen Zs and millennials who are the primary users of BNPL services in Indonesia.
In Indonesia, millennials constitute over 52% of BNPL users, followed by Gen Zs with 35%, according to Indonesian private credit bureau IDScore. As BNPL continues to gain popularity, the Financial Services Authority (OJK) in Indonesia is exploring regulatory frameworks tailored to BNPL services to ensure sustainable growth and consumer protection. OJK’s deputy commissioner emphasized the need for balanced regulation that supports industry growth while safeguarding public interests, indicating a proactive approach to addressing concerns over financing risks associated with BNPL services.
Despite the potential risks, OJK expects growth in the use of BNPL as more people adopt such services. Major banks in Indonesia, including BCA, Mandiri, BNI, CIMB Niaga, and Allo Bank, have integrated BNPL services into their offerings, highlighting the industry’s resilience and commitment to the model. While BNPL offers convenience and flexibility to consumers, there is a need for prudent regulation to mitigate risks and ensure responsible lending practices. As technology continues to drive online shopping transactions, the performance and growth of BNPL financing companies are expected to increase, indicating a promising future for the industry with the right regulatory oversight in place.
