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Navigating buy now pay later: White labeling scheme regulation
In reality, numerous e-commerce companies merely serve as intermediaries, facilitating the transfer of funds between finance companies and consumers for PayLater services.
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Quick payment: A customer scans a Quick Response Indonesia Standard (QRIS) code on July 7, 2024 to settle a transaction at Imah Kopi coffee shop in Gunung Karang, Pandeglang regency, Banten. (Antara/Muhammad Bagus Khoirunas)
T
he widespread operation of buy now pay later (BNPL) schemes, better known as PayLater, in e-commerce has raised concerns about the practice of white labeling, where consumers mistakenly believe the funding originates from e-commerce platforms rather than the finance companies providing it.
With over 29 million PayLater accounts and rising consumer complaints, it is crucial to address the lack of transparency and ensure consumers receive clear information about the true source of their financial products.
Amid the surge in e-commerce transactions, PayLater has emerged as a prominent choice among consumers for payments. Consumers opt for PayLater due to various factors such as convenient credit access, appealing promotions and the flexibility offered in installment payments.
Based on data from the Financial Services Authority (OJK), as of June 2024, there were 29.5 million PayLater accounts, with 28.31 million borrowers and a total debt balance of Rp 23.2 trillion (US$1.45 billion)
PayLater is the outcome of a partnership between e-commerce entities and third-party entities, particularly finance companies. Consumers often perceive that the funding they receive originates from the e-commerce platform rather than the finance company. In reality, numerous e-commerce companies merely serve as intermediaries, facilitating the transfer of funds between finance companies and consumers for PayLater services.
Given the increasing number of consumer complaints related to financial services that are reported to the OJK, particularly 1,113 complaints related to PayLater from January 2023 to July 2024, it is crucial to enhance consumers' understanding of the financial products and services employed to minimize the risk of consumer losses.
In adherence to the principles of openness and transparency regarding consumer protection in the financial services sector, it is significant to ensure that consumers receive comprehensive information about the PayLater provider that they use. However, in practice, details about the finance company as the entity providing the funding are often presented inconspicuously in fine print at the bottom of e-commerce applications.
