Buy-now-pay-later plans lead to rampant scams and bad debt across Southeast Asia

Dang Thi Han, who works at a spa in southern Vietnam, was short of cash in early June. So she turned to a Facebook group she had heard of — “Shopee SPayLater wallet community.” She found someone willing to transfer cash to her if she used the buy-now-pay-later option on the Shopee e-commerce platform to pay his utility bills. Han did so, only to never hear from him again.

The buy-now-pay-later (BNPL) feature is near-ubiquitous in e-commerce. But its rapid growth is powering a gray market of peer-to-peer loans, also known as cash-outs, in Southeast Asia. Hundreds of BNPL cash-out groups on Facebook connect lenders with bills to borrowers in need of cash. But lenders can disappear without making the promised payment, and borrowers sometimes do not pay the bill in full.

“I’m not the only one who got scammed on Shopee SPayLater — there are many others, too,” Han, 21, told Rest of World .

She paid 611,000 dong ($24) on the user’s utility bills, with the understanding that he would transfer the cash to her after charging a small fee. But he disappeared.

“I have to pay a high interest [on the amount] every month” to the BNPL provider, Han said.

Since BNPL was introduced in Southeast Asia in 2018, it has helped boost online purchases, particularly among younger consumers . It has also been embraced by people who do not have access to formal credit. About 30% of the population aged 15 or over in Thailand is unbanked or underbanked. In Vietnam and the Philippines, that number is over 60%, according to Euromonitor International .

But as BNPL becomes more popular, concerns over indebtedness are also growing. The Singapore FinTech Association has introduced a BNPL code of conduct , which includes protections such as limits on outstanding payments, caps on fees, and transparent disclosures “to mitigate the risk of consumer over-indebtedness.” Thailand’s Kasikorn Bank, which operates KPayLater, said earlier this year that it would stop accepting new BNPL users as it couldn’t determine the “income level of prospective clients.”

Thailand’s National Credit Bureau has called on BNPL providers to improve controls to prevent misuse of the system to create informal loans. This could encourage loan sharks and worsen household debt, it said. The country’s household debt-to-GDP ratio is among the highest in the world, posing severe risks to the economy, the central bank has warned. The Cyber Crime Investigation Bureau has also issued a warning about BNPL scams.

A BNPL cash-out is attractive to individuals because “it offers fast access to cash and low interest rates” compared to traditional moneylending, according to Huy Pham, a finance lecturer at the Royal Melbourne Institute of Technology (RMIT) Vietnam. But the practice is unregulated, and people who are duped are not protected by law. “If these schemes go on uncontrolled, then we might have a rising level of bad debt at the BNPL providers,” Huy told Rest of World , referring to financial entities such as Vietnam’s Reepay, Singapore’s Atome, and SeaMoney that powers SPayLater.

BNPL e-commerce payments in Southeast Asia, valued at $3.1 billion in 2022, are projected to increase fivefold by 2027, according to IDC Financial Insights’ report . Some e-commerce companies may be turning a blind eye to the cash-outs because “they want to scale up fast,” Nguyen Anh Cuong, chief executive of Fundiin, a BNPL provider in Vietnam, told Rest of World .

“They may not be so strict … because strictly controlling each transaction leads to a not-so-good customer experience,” he said.

Technically, platforms don’t allow cashing out BNPL credit. At Fundiin, merchants are required to provide receipts for high-value transactions to weed out fake orders, Cuong said. Users can only top up credit using their own phone number, and this measure can also be applied to utility bills, he said.

SPayLater “monitors and takes action against suspicious accounts or transactions,” a spokesperson for SeaMoney told Rest of World . It has a “strict policy against service misuse and platform abuse,” with measures to “safeguard our users, [and] community education programs focusing on responsible use and scam prevention.”

Some users believe they are behaving responsibly. Lu Tan Tu offers cash-outs against utility bills via SPayLater and e-wallet MoMo in Da Nang city in central Vietnam. The 24-year-old has been doing cash-outs for a year, with amounts ranging from 500,000 dong ($20) to 3 million dong ($119), he told Rest of World . He charges 1%–5% in service fees, “just as a side business to earn money for gas.” For borrowers, cash-outs are “a safer alternative” to loan sharks, he said.

TPBank, which handles credit for SPayLater in Vietnam, states in its terms of service that the feature may only be used to purchase goods and services on Shopee. But in using it for utility bills, cash-out providers don’t actually break the rule, Huy at RMIT said.

In Pampanga province in the Philippines, Maureen Manalili Balagtas, a 23-year-old mother, sees cash-outs as a beneficial service. She learned about SPayLater cash-outs for online vendors from tutorials on YouTube , she told Rest of World .

Vendors with business accounts that are compatible with SPayLater use QR codes for Shopee’s scan-to-pay function. Clients wishing to cash out simply need to scan the QR code as if they were paying for an item. Once the merchant receives the money, they transfer it to the client, minus a service fee.

Balagtas charges a 4% service fee for cash-outs, and had over 100 customers in the very first month, she said. Her clients have used the money to pay bills, and even start small businesses, she said. But she is aware of fraud: “Many have been scammed by others.”

Some of Tu’s clients in Vietnam have been unable to repay BNPL platforms in time, he said. About 70% of the people advertising cash-outs in Facebook groups are scammers, he estimated. “The scammers are very sophisticated; they fake all sorts of things,” he said.

Platforms have been issuing warnings. In Vietnam, MoMo warned that cash-out schemes are scams. Yet a Facebook group for MoMo cash-outs has nearly half a million members.

It is difficult to ascertain the scale of bad debts with BNPL cash-outs. Ngo Minh Hieu, who leads a scam prevention project in Vietnam, said the borrowed sums are “not large.” What is more concerning is that borrowers are giving their personal information to strangers, “which could be used for future scams,” he told Rest of World .

For her part, Han, the spa worker, has posted a warning against her scammer on the SPayLater Facebook group, complete with screenshots. To avoid being charged for late payments by SPayLater, she had to borrow money from other loan apps, she said.

“People should be vigilant and think hard before they cash out,” said Han. “One time was enough to scare me forever.” ▰

Lam Le is a reporter for Rest of World covering labor and technology in Southeast Asia. She is based in Hanoi, Vietnam.

Jitsiree Thongnoi is an independent journalist based in Bangkok.