ShopBack has announced the shutdown of PayLater, its Buy Now Pay Later (BNPL) scheme, marking the latest withdrawal from the BNPL scene in Singapore.

Unlike traditional credit card models, BNPL allows consumers to split payments over time, offering convenience and flexibility at the point of sale. However, the road to success is not easy – BNPL players, particularly independent ones, encounter various challenges ranging from high customer acquisition costs to merchant acceptance and regulatory hurdles.

Join us in this latest episode as we explore:

  • The complexities of the BNPL landscape;
  • The struggles of BNPL services in the region, from regulations to consumer behavior;
  • Key success factors for BNPL to thrive, particularly in Southeast Asia;
  • Differences between standalone BNPL apps and integrated platforms;
  • Future prospects of BNPL in the region.

You can listen to the full episode here:

Also available on apple podcast.

Featured materials: 

Buy Now Pay Later in Southeast Asia – “you either die a hero or live long enough to become the villain”, TheLowDown

pace | Buy now, pay later (and later)


[AI – generated transcript] 

[00:00:00] Sabrina

And welcome to episode 69 of the Impulso podcast. So on today’s episode, Jianggan and I are going to be talking about Buy Now, Pay Later, AKA BNPL. So I think those in Singapore might have noticed some recent updates in the Buy Now, Pay Later scene. So Atomi, which used to be almost everywhere, is not as active anymore.

Pace has also liquidated. Actually, Pace is something that I have heard of. Never heard of, but Jianggan just showed me an ad, which I will play here. It’s a 30 second ad and I’ll also link it in the show notes. 


[00:00:34] Jianggan

You should definitely play here. And the Pace ad, which was at one point of time, played everywhere at MRT stations in Singapore.

It’s just phenomenally interesting. 


[00:00:45] Sabrina

It’s a very interesting, I will play it here. 

Sometimes you want things. But do I really need this? Yeah, you needed this. You definitely needed this. When you pay with Pace, you split your payments in three. One, two, three. I got this. I got this. I got this. Get what you love and bring it home today. Buy now and pay later. Buy now, pay later. And later.Split payments in three with Pace.

And then of course, ShopBack also recently just announced that one, it is retrenching some of its employees. And secondly, it’s exiting the buy now, pay later scene. So, Jianggan, maybe you want to explain to our listeners who may not know, what is Buy Now Pay Later?


[00:01:38] Jianggan

Okay, Buy Now Pay Later is a concept where you allow consumers to, I mean, buy goods at points of sale, and only pay in installments, or, like, delayed, right? I mean, you pay, like, a month after, or you pay in three, six, or nine installments. So the whole business model goes I think there’s lots of like a coverage about buy now pay later or why these companies are exiting buy now pay later business.

I don’t think anybody actually explain how this business actually works. So of course, internationally, you have companies like Klarna invested by Sequoia, which recently has been going through some boardroom dynamics. Like somebody was being forced out and somebody it came back in, et cetera, and you have a firm, which is in the U. S. This is a company working with Amazon, but How this is actually works is that so you tell the merchants that consumers, because of this buy now pay later option, they’re more likely to make a purchase at your point of sale. And in return, you charge merchant a commission. So, like what do we call merchant discount, right?

You know, we’re not that different from what credit card companies have been doing, right? credit card companies have been, you know offering the credit card to consumers for free as long as you pay back on time, you don’t have to pay anything and the merchants. Would pay a processing fee. I think in Singapore will be about between 1. 9 percent to maybe 3. 3%. To the credit card ecosystem say that because this is for the convenience of customers. I mean, making payment at my place, which allows me to sell more customers. And I’m paying this. So if you think what buy now pay later essentially is credit card, but it’s offered in a virtual way, right?

 There’s no, like, fancy physical card is usually operated with the app, right? You scan a QR code. 

Yes. Have you used that before? 


[00:03:33] Sabrina

I have so I know Atomi like they split payments But if you use the app they allow you to use it for one time payment at all. Okay.


[00:03:43] Jianggan

What’s one time payment? So Like the payment payment or delayed payment 


[00:03:47] Sabrina

payment payment.

So I pay on the spot, but because they have They want to onboard you onto the app. So they give you like a 5 or 10 off. So I use the app, but I don’t use the buy now, pay later function. I’ll pay all at once because I’m the consumer who does not understand how buy now, pay later works or why I would want to use buy now, pay later.

So for me, I feel where I’ve seen this buy now, pay later is a lot of retail stores or FMP chains. Right. And my mentality is that if I cannot afford a meal, that is maybe Or item of clothes that is maybe 60 and I have to split it into three payments, I wouldn’t even be eating there. 


[00:04:27] Jianggan

But that’s precisely the value proposition of buy now pay later, right?

So let’s say that, okay, if your monthly salary is 1, 000, of course, you have much more than that. Yes. Okay. But let’s say that if something which is like costing you like 250. I need to think twice before making a decision saying that why I want to spend a quarter of my salary on this. But now if you can split that into four payments and the decision costs much lower, you can say that, okay, I can afford this better.

But the question is what kind of goods would serve the consumers in Singapore that would fit into this category, right? Because for large ticket items, like what, like if you buy a laptop you have a credit card installment program. 


[00:05:09] Sabrina



[00:05:09] Jianggan

12 months. 


[00:05:10] Sabrina

If you buy Apple, Apple even has their own installment program.


[00:05:14] Jianggan

So Apple itself runs a financing company as well, right? 


[00:05:17] Sabrina

So as a consumer, what kind of goods would I buy? For example, big ticket items. I’m thinking like if I want to buy a car or a house, I would probably take a bank loan instead of all these, if I want to maybe branded goods, but I don’t see why luxury stores would want to work with buy now, pay later companies.


[00:05:34] Jianggan

I think luxury stores target customers. I mean, in the context of Singapore, the other markets will be different, right? In the context of Singapore. Luxury customers would have credit cards. They have no problem accessing to credit options, right? Credit card and other options but usually for young people fresh out of university or still in university Sometimes they’re still constrained about credit I mean the banks might not give them a credit card because you don’t have credit history so these are usually the good customers of buy now pay later, right people who are better than the cash loan customers.

So, I mean, those will go to loan shark and stuff, but people who need credit and then this are usually the good customers. The question in the context of Singapore comes to how much does it cost for you to acquire these customers? I mean, you mentioned that 5dollar , 10 dollar vouchers to incentivize. Yeah. And if it’s like 2 dollar, it probably not be interested.


[00:06:26] Sabrina

No, and I think. When Atome was very active in Singapore, they hired Someone, at a lot of restaurants and all just to go down the queue or to go around customers in the store, getting them to download the app. 


[00:06:39] Jianggan

Yes. And just that is not enough.

Because you remember by now is a payment option, just like credit card, credit card companies spend a lot of money to make sure that you use a credit card as default payment option. And what can you do to incentivize people to use that as a default payment?

I think credit card companies in places like Singapore, Hong Kong, or other affluent cities, they found a way. Airline miles. 


[00:07:04] Sabrina



[00:07:05] Jianggan

Airline miles is the cheapest way to get people hooked. 


[00:07:10] Sabrina

That is correct. Because my first credit card. 


[00:07:13] Jianggan

Is a miles card. And if you think about that, I mean, the cost Is probably, I mean, the different banks, different credit card companies would have different procurement costs for the miles from airlines, right?

But I would think that it will probably cost them about 1 to 1. 2%, 2.1,2.2 percent of the transaction value that they use as a cash back to you, essentially, in the form of airline miles. But if, they were to give you a discount, if they were going to give you cash back one or two, 1. 2 percent will not be enticing enough for you.

They will need much more to make it.


[00:07:46] Sabrina

Yeah, they offer cash backs over a large variety of services and normally it’s about maybe three.


[00:07:52] Jianggan

Yeah, it has to be something which is more enticing. I mean, so I don’t know why they’re not using airline miles. I’m probably because, I mean, they have not negotiated a good deal with airlines or airlines ask them for a larger commitment.

I don’t know. But the tricky thing is now acquiring customers is expensive, you do lots of advertising, you’re sending people on the ground, you need to basically keep vouchers and you need to make sure that the customers can use everywhere. So, which means you need to get people to different kinds of merchants to make sure that merchants would have acceptance and merchants would be willing to promote customer.

I mean, this is basically what critical companies did. Yeah. 


[00:08:27] Sabrina

But again, I think by now pay later, it’s a little different, right? Not all merchants would be so willing to accept this sort of payment form as opposed to a credit card. 


[00:08:35] Jianggan

Well, not all merchants are willing to accept credit cards. So now if you go to some of the smaller merchants.

I mean, smaller merchants, they will say that, okay, if I accept a credit card, I will need to pay 3%. I’m not willing to pay 3%. So now you pay by NETs. Which is a Singapore bank account. Yeah. And which today is still having a very, very interesting customer experience. Yeah. So not good enough for credit card users.

 So if you think about that so they are working on a presumption that they can go to merchants and charge a higher percentage or higher MDR and which are the merchants. Who are willing to pay for a higher high MDR. It has to be merchants, which has a high gross margin, who would perceive that having an option will actually bring them more customers.

 So which categories would have high gross margin. Fashion?


[00:09:23] Sabrina

Makeup. Cosmetics. Cosmetics. As I’ve learned on our recent immersion to Shenzhen. 


[00:09:28] Jianggan

Cosmetics, health supplements. Souvenir stores. Like Batcha and PWG. Those kind of souvenir stores, right? And this, they will have high margins. But the question is that, I mean, these guys, when they’re in the market, they’re also not dumb.

They realize that, okay, if a customer who comes in, he or she already has a credit card, and he or she also have had a buy now pay later option, what will incentivize me? To 


[00:09:52] Sabrina

use buy now pay later. 


[00:09:53] Jianggan

And of course many of them would require the buy now pay later companies to fund the discounts and theoretically this sort of MDR, whatever discount should be funded from the merchants marketing budget.

But realistically, many of them have to tell them that, okay, if you want me to use it, I’m going to pay me instead of me paying you. So that made it difficult for buy now pay later players, so they have to deal with high customer acquisition cost. They need to have a large workforce to maintain offline acquiring and need to incentivize the merchants and they are a payment option and with a credit element on it.

Right? So they would usually have a delinquency or number of ratio, so they need to also run the credit models very well. And I think about it credit card companies run installment of 12 months. Yes. And by now, pay later companies run three months or three installments.

Do you know why? 


[00:10:50] Sabrina

They have, they can, it’s so that they reduce their risk, right? 


[00:10:54] Jianggan

So that they can first, I mean, the loans they gave are very small, like 60, 100, right? And over 3 months, so they can very quickly assess data points And at first, of course, the risk is reduced because per item, the ticket size is small, the loan size is small.

And second is that because of the smaller duration, so it’s easier for them to establish data points and start running data models. I mean, every three months is a cycle, but it’s like every one year you get a complete profile of a customer. 


[00:11:21] Sabrina

So it does. So, but even in countries like, okay, generally in Southeast Asia, we know that Singapore has a higher credit card penetration rate compared to our neighbors.

Right. But even in this countries, we don’t see by now pay later apps stand alone by now pay later apps as prevalent. Right. Because now we know Shopee has a Shopee pay later, is that what it’s called? 


[00:11:44] Jianggan

Shopee has Shopee pay later, Grab has Grab pay later as well. And these guys have natural advantages running by now pay later because first, they don’t need to spend money to acquire customers.

Shopee pay later and Grab pay later are offered to customers who are already using grab and what we use in shopping at the point of checking out. So as buy now pay later per se, they don’t need to acquire customer. They just need to convert customers. And of course, if I’m already a Shopee customer at a point of checkout, I know that. Okay. I can defer my payment. I mean, I think the decision cost is lower, especially when you already have an account, when they can give you credit very quickly. So, and that helps Shopee as well, right? Because it helps the transaction sort of conversion rate at shopee. And then Shopee charges like 10 percent to the merchants.

So that’s enough to cover the, whatever payment channel cost or whatever they have. Right. And I think Shopee has learned quite a lot from Ant Group sort of a payment affiliate. Right. So they run a huge buy now pay later operations called Huabei. And I think back then nobody used the term by now pay later.

So, Huabei is like a virtual credit card and on top of Huabei. And there’s another option called Jiebei which is the cash loan. So certain percentage of the customers would be converted into cash loan because I mean, I have a credit card, but sometimes I need cash and credit card company charge you to withdraw cash. Right.

And if you don’t pay your credit card, your own time, what do they offer you? Instead of paying for the credit card, how about we offer you a loan? Yes. So we run that at scale. When you have the leverage, I mean, taking additional capital from banks and other institutions, you run a very profitable business.

That’s why ad groups have been very profitable. I think that’s also why Shopee’s consumer credit business has been very profitable, but when it comes to independent buy now, pay later players, they don’t have that leverage. 


[00:13:40] Sabrina

So does this mean that on its own for buy now, pay later players who are not linked to a platform or they’re just running as a buy now pay later.

It’s not a sustainable business model at all. Is, do you think there’s any way that a buy now pay later app on its own would actually be able to become profitable? 


[00:13:57] Jianggan

That was something that Klarna will tried to do because their proposition. I presume I have not seen a deck.

I presume their propositions that they’re operating out of Sweden, right? I think Western Europe, Northern Europe, the difference in those markets is that they don’t have dominant major platforms like Shopee in Southeast Asia or Alibaba in China. So they would have a lot of different brands running their own sort of online stores, running their own sort of shops, and it’s very, very separated.

 So in that place. They have the opportunity to become the consumer entry point, right? Consumer would, okay, decide where to shop by opening the Klarna app, rather than the, I don’t know, brand. com, so H& M. com, whatever. And see what kind of discounts, what kind of offerings they have. So essentially, they have the potential of becoming an e commerce platform aggregated.

But to realize that it’s not easy, right? You need to make sure that the customer built into the habit of, you know, using you 


[00:14:56] Sabrina

retail stores paying through your app. 


[00:14:59] Jianggan

Yes. So that’s actually quite demanding and it’s not easy to implement it very well. We also have players in places like, actually we also have players which operate a similar business model.

Like Stori in Mexico or what Nubank started with in Brazil, they issue credit cards. They issue virtual credit cards they give you an app, right? And they’re saying that, Hey, you can apply for a visa card or mastercard. And the difference between them and the buy now pay later players we see in Southeast Asia, like shop back or Tommy’s, this guy’s just do the issuing.

So they don’t go to merchants. The merchants would be what the banks have installed, you know, a credit card acceptance machine there. So they just covered the issuance part of payment, not the settlement and the acquiring part of settlement settlement. So these guys so you know, for credit cards, that’s like 3 percent merchant pay, right?

About 1 percent goes to the issuer and they don’t have to maintain the expensive, like merchant network. 


[00:16:00] Sabrina

They just issue. Then what makes them different from a credit card that I get, let’s say from the bank?


[00:16:05] Jianggan

They are faster than a bank. They can sort of acquire users much faster.

They have better customer experience. I remember, like, calling the bank for customer service. So this is their differentiation. And they don’t create a full spectrum. They leverage existing network, which Visa and Mastercard have already created. And they just serve the customers really well and get customers to be viral and know the customer data really well.

And I think they have a competitive edge against credit card issuing part of the bank. But for buy now pay later Players who try to do the full spectrum. I think it’s a bit difficult. 


[00:16:38] Sabrina

So they should just stick one small slice of the pie and focus on that. But do you think that will work in, I mean, Nubank is in 


[00:16:47] Jianggan



[00:16:48] Sabrina

right? Do you think 

that will work in Southeast Asia, Singapore? I mean, Singapore, Singapore has such a high credit card penetration rate already. Right.


[00:16:56] Jianggan

I do think they have one advantage in Brazil in a sense that a credit card acceptance the acquiring part at the merchants has been well developed, but credit card issuance, there’s a gap.

So not many consumers have credit cards because the banks are strict. And also there’s 1 thing special for Brazil, which I think none of the countries in Southeast Asia has is you pay as much as 500%. I think 582 percent the highest annualized interest rate for credit card bills. I mean, Singapore is like 28 percent or something, which is already like very high.


[00:17:31] Sabrina

500 percent is a lot. 


[00:17:33] Jianggan

But do you know why it’s 500%? Because you don’t have enough data about consumers. We do not know how good your customers are. You assume they’re bad customers and they charge everyone. I mean, just like the insurance, right? If you don’t know how good your consumers are, they charge everyone a high rate.

And then you figure out who is better, then you reduce their premium. Same logic here. Yeah. So that’s why players that Nubank would have advantage. They come into the market and they can offer advantage over traditional credit card issuers. 


[00:18:01] Sabrina

But then again, it’s also, it’s very specific to Brazil countries that are in similar situation, right?


[00:18:06] Jianggan

Yes, and I think other markets like Indonesia, so for instance, I think in Indonesia there’s a market as well because the interest rate the consumers are paying is also quite high versus, I mean, sorry, the interest spread between the cost of capital of lending companies and what consumers pay for the credit solutions is high.

So that means that the banks are sitting on fat margins and that gives room for somebody to come in who are more efficient 


[00:18:32] Sabrina

and provide a better service. Yeah. 


[00:18:35] Jianggan

So I do think there are markets in these markets.In Singapore, it’s a bit difficult because the margin is not thick enough for you to, yeah, 


[00:18:43] Sabrina

I think the credit card penetration here is already very high, there isn’t much room, but I think for in countries like Indonesia, where it’s a lot lower, maybe it’s something we will see individual buy now pay later players going to us. 


[00:18:58] Jianggan

You do already have a few players and here the key is also, I mean, how do you keep your cost structure low? How do you run a better credit model compared to others compared to the banks, especially. And how do you deal with I think lots of developing markets the regulators, because unlike banks, which have been heavily regulated, which regulations have existed for decades, which in Southeast Asia’s case after 1997, and I think the banking regulations are pretty solid, but for new fintech services, sometimes the regulations change.

And sometimes your application for whatever service you want to provide gets delayed by regulators. So this is something that you need to deal with. So the market is there. It’s not entirely straightforward for you to all expect. 


[00:19:45] Sabrina

So thank you guys for tuning into another episode of the Impulso podcast.

We hope that you guys enjoyed today’s episode. And if you did do like our podcast and follow us on Spotify, Apple podcast, or your preferred podcast platform to stay up to date on the latest happenings and trends in tech, new retail and the broader digital economy.


Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].