BORROWINGS via buy now, pay later (BNPL) products have higher delinquency rates compared to other credit types, but loan volumes remain low even as the segment has continued to grow as these bookings are mostly made up of small amounts.
“BNPL basically targets your lower income segments — segments that banks used to kind of avoid because their ability to pay is in question. So, [even] with the lower ticket sizes of the loans, if you’re actually targeting those who would even borrow small amounts, it does increase your default risk,” CIBI Information, Inc. Chief Analytics Officer John Harley Chan told reporters late on Tuesday.
“To begin with, these are P100, P500, P1,000 purchases, and one auto loan is like P1 million. So, how many BNPL transactions will equal one auto loan? Right now, it’s still not affecting the entire industry, but there’s this segment that really is showing higher delinquencies — so that’s something that I guess fintechs (financial technology companies) are very much aware of,” he said.
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Read more: Business World
