Industries – CCOB Task Force

Buy Now Pay Later (BNPL) Industry in Malaysia

BNPL Trends & Analysis (Q1 2023 - Q1 2024)

Quick Glance of the BNPL Industry (Q1-Q3 2023)

Type of Credit Industry

Buy Now Pay Later (BNPL)

Features of a BNPL business

Purpose is to lend for consumers to pay for goods and services, payment made by BNPL provider to merchant at agreed discount for BNPL sale

Fully operated on digital platform

Pay after a specified period (post-paid) or over several instalments

On-the-spot approval or with pre-set credit limit or amount

Used at specific merchants/platforms, initially only for online purchases, now also available in-stores, usually for retail products including groceries, fashion, home & livings, electronics & digital goods, etc

Leasing

Features of a leasing business

Contract between a lessor and a lessee for the hire of a specific asset for a specific period on payment of specified rentals

Two types of leasing

Financial lease (long term)

Risk and return transferred to lessee

Similar to hire purchase but no transfer of ownership – lessee has option to purchase at end of lease term

Operational lease (short term)

Similar to rental – lease payment is based on value of asset

*Goods

· Commercial vehicles

· Computer systems and IT-related equipment

· Plant & machinery

· Construction equipment, material handling equipment

· Eco-tourism related equipment

· Health services related equipment

· Energy related equipment

· Oil & gas related equipment

· Office equipment

Factoring

Features of a factoring business

Transaction between Seller (provider of goods/services) and Buyer (consumer), and Factor (who purchases Sellers’ receivables from the sales of good/services).

Involves Seller’s assignment of receivables from Buyer to Factor.

Factoring provides access to liquidity to the Sellers for their working capital needs.

Factor helps to track, monitor and collect receivables from Buyers (Sales Ledger Maintenance) on behalf of Seller.

Factor can offer factoring facility either ‘with recourse’ or ‘non-recourse’

‘with recourse’ - factor can impose late payment, default charges, and take legal action on Seller, in the event Buyer fails to honour payment upon maturity.

Businesses that seek credit from factoring companies range from micro and SMEs to large corporates for

cash flow management purposes

receivables management/collection

supply chain optimisation.

Impaired Loan Buyers

Features of an ILB business

Non-Performing Loan (NPL) comprises of personal loans, housing loans, hire purchases, credit cards etc from banks and non-banks [secured or non-secured].

ILB buy debts (impaired/NPL) from lenders at a discounted value and assume the rights and obligations of lenders under credit agreement with borrowers.

Factors in determining discount value: aging of loan; whether loan is secured or unsecured; whether purpose of loan was for personal or commercial use; and age of borrowers.

No involvement in origination/provision of credit to borrowers.

Acquired receivables (NPLs) and validation via Court Vesting Order as new owner of receivables.

Carry out credit assessment for internal decision making in determining purchase price and collection feasibility.

Debt Collection Agencies

Features of a DCA business

DCA acts as agent of credit provider, to undertake recovery efforts on delinquent borrowers.

Enters into a service level agreement (SLA) with credit provider to collect overdue credits.

Calls and field visits are its core activity.

Fees earned on success cases only, usually no upfront fee or retainer fee applied.

DCAs do not usually collect cash, any payment by customer will be made directly to credit provider.

DCAs that take on cases from licensed financial institutions are required to adhere to the minimum standards and recommendations in BNM’s Circular on Fair Debt Collection Practices.