The Buy Now, Pay Later (BNPL) service is increasingly popular in Thailand, to the point of being used to buy small-value daily items such as boba tea and chicken rice.
However, this development has begun to raise concerns among authorities because it is feared that it may encourage people to spend beyond their means.
The Governor of the Bank of Thailand, Vitai Ratanakorn, said that digital credit facilities that are too easily accessible can form a habit of debt, especially among young people.
According to him, there are certain purchases that should not be made in installments, including food and drinks that cost only a few tens of baht.
This concern arises when Thailand is facing a high household debt rate, which is around 87% of Gross Domestic Product (GDP).
This figure is among the highest in Asia and most of the debt stems from consumer spending, not the purchase of assets such as houses.
In recent years, the use of BNPL has grown rapidly in line with the increase in e-commerce and digital payment activities. Users only need a few clicks on their smartphone to convert purchases into installment payments.
In fact, the more relaxed eligibility requirements compared to credit cards make the service more accessible.
While many BNPL plans offer interest-free installments for short periods, some long-term plans can charge annual interest rates of up to 25%, in addition to charges and penalties for late payments.
Young people are seen as the most active users of this facility. Almost half of Thais aged between 20 and 35 have debt, and this group also accounts for the majority of non-performing loans.
Many admit that BNPL helps when they are short on money, but at the same time makes them more inclined to spend.
In this regard, the Bank of Thailand is drafting new regulations to regulate BNPL services.
Proposals under consideration include age and income limits for users, minimum purchase values, and limits on charges that can be imposed.
Economists believe that BNPL can help users manage cash flow in the short term, but if not used wisely, it has the potential to increase debt burdens and affect their financial position in the future.
Therefore, in addition to stricter regulation, increasing the income and level of financial literacy of the people is also important to ensure that the use of digital credit is done responsibly.
