It is obvious that pay-later financing business has bright prospects.
Jakarta (ANTARA) - The Financial Services Authority (OJK) highlighted the bright prospects of digital-based financing business, known as pay-later financing, amid growing transactions in marketplaces.

OJK's Deputy Director of the Strategic Policy Development Department, Mulia R. Simatupang, stated here on Wednesday that buy-now pay-later (BNPL) transactions have shown an increasing trend in the last three years.

Citing the result of research by Kredivo & Kata Data Insight Center, Simatupang noted that the percentage of BNPL service users in marketplaces has increased significantly, from 28.2 percent in 2022 to 45.9 percent in 2023.

"It is obvious that pay-later financing business has bright prospects because of its large market niche and a growing rate of consumers using pay-later financing methods while shopping," he stated at the launch of the report on Indonesian e-Commerce Consumer Behavior.

Currently, there are five pay-later financing companies in the marketplace.

Simatupang has called on financing companies to remain prudent in expanding their businesses by implementing risk mitigation, especially to keep non-performing financing (NPF) at a tolerable level.

"As the authority and supervisor, we remind managements to run their companies carefully and the growth of financing receivables needs to be balanced with risk mitigation to maintain the level of non-performing financing," he stressed.

He called to address several challenges in the pay-later financing business.

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The first challenge is to prevent the business from being used in money laundering and terrorism financing.

According to Simatupang, pay-later finance companies channel their attention on these two aspects, as the business is focused on the pace and growth in the distribution of funds.

"(This is) because pay-later financing companies prioritize speed and growth in financing distribution, but these have not been followed by adequate credit point or screening process," he pointed out.

The next challenge is that pay-later financing companies, on average, have a low profit rate as compared to the assets they manage. If this issue could not be managed properly, then the company may not be able to survive.

"Because there is a marketing burden that is a workload with the platform, there are cashback promos, free shipping (shipping costs), and others, but this can be overcome," Simatupang stated.

According to Kredivo Research & Data Insight Center, pay-later is now able to outperform the bank transfer method.

As many as 16.2 percent of consumers choose pay-later as the most frequently used payment method in marketplaces, while 10.2 percent of consumers choose the bank transfer or virtual account payment method.

This research involved 9,239 respondents across Indonesia.

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Translator: Maria Cicilia, Sri Haryati
Editor: Yuni Arisandy Sinaga
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