Unfair lending practices in BNPL

Buy Now, Pay Forever? The Shadowy Underbelly of BNPL The Buy Now, Pay Later (BNPL) sector has exploded in popularity, hailed as a convenient and accessible financial tool. Yet, beneath the hype lies a troubling reality: BNPL may be fostering a generation of debt-burdened millennials and Gen Zers. This article, BIS analysis of BNPL , delves into the hidden risks of BNPL, exposing its predatory practices and challenging the "fintech for good" narrative. Hidden Costs and Risks: 1/ Debt Trap for the Vulnerable: BNPL targets younger demographics, often with limited financial literacy and stable income. Easy access to credit without thorough underwriting creates a perfect storm for overspending and debt accumulation. 2/ Invisible Burden: Unlike traditional loans, BNPL purchases often escape credit bureau reporting, creating a hidden debt burden that can negatively impact future borrowing. 3/ Subsidized by Everyone: Merchants absorb high BNPL fees, ultimately inflating prices for all consumers, regardless of payment method. Regulatory Blindspot: The rapid growth of BNPL has outpaced regulation, allowing loopholes and lax oversight. This lack of control has fueled predatory practices and irresponsible lending. Time for Accountability: Regulators are finally waking up to the dangers of BNPL. It's crucial to implement stricter regulations to protect consumers, promote responsible lending, and ensure greater transparency within the industry. Moving Forward: BNPL needs a fundamental shift. Instead of prioritizing profit and VC inflows, the focus must be on consumer protection, financial literacy, and responsible lending practices. Only then can BNPL truly live up to its purported image of being "fintech for good." The BNPL boom isn't just about delayed payments, it's about financial vulnerability and predatory lending. We must move beyond the hype and hold this industry accountable to ensure financial empowerment, not exploitation, for the next generation. Spread the word: Share this article with your network and raise awareness about the hidden risks of BNPL. Did you know about the hidden risks before you clicked on “Yes” to use pay later on your favourite digital platforms while buying something (big or small). Leave a comment and let us all learn together. #buynowpaylater #Fintech #DigitalPayments #BNPL #lending

BNPL in India is heading toward a credit bubble and data frome July 2025 confirms it. The Buy Now, Pay Later market was projected to hit $21.95B in 2025. It did. But the warning signs are catching up just as fast: - Delinquency rates are rising: Globally, 41% of BNPL users reported late payments this year. India isn’t immune. From Klarna to small-ticket fintechs here, defaults are spiking. Micro and small businesses are clocking 8.2% NPAs on informal BNPL and consumer-level defaults are quietly catching up. - BNPL is slowly leading to a debt cycle major reason being it's easy access. No credit checks. No real-time bureau reporting. Just a few taps, and you can buy that ₹6,999 ring light, a Zara top, and cover your rent too. But what happens when you stack five BNPL loans at once? You lose track. You default. You pay late fees. Your CIBIL tanks and it wasn’t even reported in the first place. - Credit layering is spiralling: We’re seeing BNPL coexist with credit cards. Especially among millennials and Gen Zs who are already defaulting on cards at alarming rates, per RBI reports. That’s two unsecured loans running parallel, often with no consolidated visibility. And while RBI has tried to tighten the screws by pushing BNPL towards prepaid instruments but most regulation is reactive, not predictive. We're still in an early innings regulatory sandbox while credit risk is compounding like unpaid EMIs. So here’s my take: "BNPL in India isn’t just a fintech innovation anymore. It’s a psychological product that’s normalised delayed pain in exchange for immediate pleasure." And if we’re not careful, we’re going to end up with a new class of financially overleveraged 20-somethings, not because they borrowed recklessly, but because the system told them it was okay.

Debt is the most aggressively marketed product in Pakistan . . . During a financial wellbeing workshop conversation a participant shared that he uses Buy-Now-Pay-Later /Buys things on installments and thinks that it is a really good saving product. While there is many layers to unpack there in terms of how wrong that is I reflected on why he would think like that. In the last 2 years when inflation and interest rates were high, in Pakistan we’ve seen countless BNPL propositions emerge. There is significant advertising from these players as well. There are some things everyone should understand about BNPLs: - Its a debt/loan (not a saving product) - It is much more likely for you to buy things impulsively when you are only paying a fraction of it at the time of purchase and end up with multiple installments to pay. - Your personal debt level would increase because you will feel that there is flexibility of spreading out payments. Then there are other issues, because there is no central repository (if there is please enlighten me), an individual may go on accumulating BNPL installments with no monitoring in place which would lead to household debt levels in Pakistan increasing without anyone realizing it. When companies copy and paste business models from other markets, regulators and consumer protection agencies are responsible to see what negative effects (if any) have these models created in other markets. It is not necessary that what’s good for business is also good for consumer’s financial wellbeing and the later should be of supreme priority especially in a country like Pakistan where financial literacy levels are a meager 19%. In the UK - More than £1 in every £7 spent online uses Buy Now, Pay Later scheme - Half of 18-34 year olds were unaware that they could get into debt with BNPL - More than half of those who used BNPL were charged fees During our workshops, I advocate for staying away from short-term debt because it is the number 1 killer of your ability to build any personal wealth, specially when I talk to the next generation of financial services/products consumers. Do Not Buy anything that you don’t have the ability to Pay for Today. #bnpl #debt #pakistan #consumerprotection