Buy Now Pay Later Trend Gains Momentum among Indonesian Consumers, OJK Gives Explanation

Buy Now Pay Later Trend Gains Momentum among Indonesian Consumers, OJK Gives Explanation (photo: volusion)

The Buy Now Pay Later (BNPL) trend is experiencing a surge in popularity among the Indonesian population. According to recent data released by the Financial Services Authority (OJK), the number of Pay Later business contracts has grown significantly, reaching 18.18 million or a 33.25 percent increase in May 2023. OJK has shed light on the reasons behind this remarkable growth.

Comparing the figures, the number of Buy Now Pay Later contracts has risen from 54.70 million in May 2022 to an impressive 72.88 million in May 2023, indicating the growing preference for this payment option among consumers in Indonesia.

Ogi Prastomiyono, the Executive Head of Insurance, Guarantee, and Pension Fund Supervision at OJK, has attributed the increasing popularity of BNPL to the ease and speed of the financing approval process.

Ogi stated, “In addition, the attractive promotions offered by Pay Later services have captured the attention of the public.” This highlights the role of appealing incentives in driving the adoption of BNPL.

Furthermore, Ogi emphasized that Pay Later services provide various enticing offers to prospective borrowers, including discount programs, cashbacks, and the option of interest-free installment plans. These features further contribute to the attractiveness of the BNPL model for Indonesian consumers.

OJK has also addressed concerns regarding the non-performing loans (NPL) associated with BNPL businesses. Triyono, the Head of the Department of Supervision over Other Financial Services Institutions at OJK, explained that the impact of the Covid-19 pandemic on NPLs in the BNPL sector has been gradually controlled and improved. “While there is no portfolio that is entirely free from NPL, the situation is now more manageable,” Triyono reassured.

Triyono highlighted the positive trajectory of the BNPL industry in Indonesia, emphasizing its alignment with the growing number of users and participants. He noted that the success of the BNPL sector is also supported by the robust infrastructure in various e-commerce platforms, enabling seamless integration of BNPL services into the online shopping experience.

Furthermore, Triyono emphasized the significance of credit scoring services for the development of the BNPL sector. The collaboration between the Credit Information Management Institution (LPIP) and Innovative Credit Scoring (ICS) is seen as a catalyst for the expansion of BNPL.

The availability of credit scoring, facilitated by this partnership, enables a more accurate assessment of creditworthiness, enhancing the overall effectiveness and reliability of BNPL services.

In Indonesia, Credit Scoring services are offered by two distinct entities, namely the Conventional Credit Information Management Institution (LPIP) functioning as a Traditional Credit Bureau, and Innovative Credit Scoring (ICS) providers.

These entities provide comprehensive credit reports and scoring based on traditional credit data, including loan repayment history and outstanding debts, thereby ensuring a robust credit evaluation system within the BNPL ecosystem.

The continuous growth and positive outlook of the BNPL sector in Indonesia are indicative of the increasing consumer demand for flexible payment options and the ability to manage their finances conveniently.