When Dang Thi Hang, a spa worker in southern Vietnam, ran out of cash in early June, she turned to a Facebook group she had heard about: Shopee SPayLater Wallet Community. She found someone who would send her cash if she paid for utilities using the “buy now, pay later” option on Shopee's e-commerce platform. She did so, but never heard from them again.
Pay later (BNPL) features are nearly ubiquitous in e-commerce. But their rapid growth has driven a grey market in peer-to-peer loans, also known as cashouts, in Southeast Asia. Hundreds of BNPL cashout groups on Facebook connect lenders with invoices with borrowers in need of cash. But lenders sometimes disappear without making their promised payments, and borrowers sometimes don't pay their invoices in full.
“I'm not the only one who has been scammed by Shopee SPayLater. There are many others,” Han, 21, told Rest of World.
She paid 611,000 VND ($24) for a user's utility bills, on the condition that she would transfer the cash to him after charging a small fee. But then the user disappeared.
“You have to pay high interest (on that amount) to the BNPL provider every month,” Han said.
Since its introduction in Southeast Asia in 2018, BNPL has helped boost online purchases, especially among younger consumers. It's also been embraced by those without access to formal credit: In Thailand, about 30% of the population over 15 is unbanked or underbanked; in Vietnam and the Philippines, that number is over 60%, according to Euromonitor International.
But as BNPL grows in popularity, so do concerns about debt. The Singapore Fintech Association has introduced a BNPL code of conduct that includes safeguards such as limits on outstanding balances, fee caps and transparent disclosures that it says will “reduce the risk of consumer over-indebtedness.” Thailand's Kasikornbank, which operates KPayLater, said earlier this year it would stop accepting new BNPL customers because it couldn't determine “the income level of potential customers.”
Thailand's National Credit Bureau has asked BNPL providers to tighten controls to prevent people from gaming the system to make informal loans, which it says could encourage loan sharks and worsen household debt. Thailand has one of the world's highest household debt-to-GDP ratios, posing serious risks to the economy, the central bank has warned. The Cybercrime Investigation Bureau has also warned about BNPL scams.
Dang Thi Hang, a 21-year-old Facebook messenger from southern Vietnam, used Shopee's “buy now, pay later” scheme in exchange for a cash transfer, but was scammed and never received the promised money.
According to Huy Pham, a finance lecturer at RMIT Vietnam, BNPL cash outs are attractive to individuals because they “can get cash quickly and at lower interest rates” compared to traditional money lending. But the practice is unregulated and those who are deceived are not protected by law. “If these schemes continue unchecked, it could lead to an increase in bad debts for BNPL providers,” Huy told Rest of World, referring to financial institutions such as Vietnam's Reepay, Singapore's Atome, and SeaMoney, the company behind SPayLater.
According to a report by IDC Financial Insights, BNPL e-commerce payments in Southeast Asia are forecast to reach $3.1 billion in 2022, growing fivefold by 2027. Nguyen Anh Cuong, chief executive officer of Vietnamese BNPL provider Fundiin, told Rest of World that some e-commerce companies may be turning a blind eye to cash-outs because they “want to scale quickly.”
“They may not be as strict with each transaction because if they were to strictly control each transaction it would create a less positive customer experience,” he said.
Technically, the platform doesn't allow BNPL credits to be redeemed for cash. Fundain requires retailers to provide receipts for high-value transactions to weed out fake orders, Cuong said. Users can only top up credits using their phone numbers, a measure that could also be applied to utility bills, he said.
A SeaMoney spokesperson told Rest of World that SPayLater “monitors and takes action against suspicious accounts and transactions,” and that the company has “strict policies against fraudulent use of our services and abuse of our platform” and has implemented “measures to protect our users and community education programs focused on responsible use and fraud prevention.”
Some users consider themselves to be acting responsibly. In Da Nang city in central Vietnam, Lu Tan Tu offers utility bill cashing services through SPayLater and e-wallet MoMo. The 24-year-old told Rest of World he has been cashing out utility bills for a year, amounts ranging from VND500,000 ($20) to VND3 million ($119). He charges a commission of 1% to 5%, and does it “as a side job to earn money for gas.” For borrowers, cashing out is “a safer option than loan sharks,” he said.
“If these schemes continue out of control, this could lead to increased levels of bad debt for BNPL providers.”
TPBank, which handles SPayLater credits in Vietnam, says in its terms of use that the feature can only be used to buy goods and services on Shopee, but by using it to pay utility bills, cash-out merchants are not actually breaking the rules, RMIT's Huy said.
Maureen Manalili Balagtas, a 23-year-old mother from Pampanga province in the Philippines, sees Cashout as a useful service, telling Rest of World that she learned about SPayLater Cashout for Online Vendors from a YouTube tutorial.
Vendors with SPayLater-compatible business accounts use QR codes for Shopee's scan-to-pay feature. Clients looking to cash out simply scan the QR code, just like they would if paying for an item. Once the seller receives the money, they transfer the amount, minus a commission fee, to the client.
Balagtas charges a 4% fee for cashing out and said he had more than 100 customers in the first month. Customers are using the cash to pay bills or start small businesses, he said. But he is aware that there are scams out there. “A lot of people are being scammed by other people.”
Some of Tu's Vietnamese clients are unable to repay BNPL platforms on time, he said. He estimates that about 70 percent of people advertising cash out in Facebook groups are scammers. “Scammers are very clever and fake everything,” he said.
Platforms have issued warnings: In Vietnam, MoMo warned that cashout schemes are scams, but a Facebook group about MoMo cashout has nearly 500,000 members.
The scale of bad debt from BNPL cashouts is difficult to ascertain. Ngo Minh Huu, head of an anti-fraud project in Vietnam, said the amounts borrowed are “not large.” What's more concerning is that borrowers are handing over their personal information to others “which could be used for future fraud,” he told Rest of World.
Meanwhile, spa employee Han posted a warning against scammers in the SPayLater Facebook group, complete with screenshots, saying she had to borrow money from other loan apps to avoid SPayLater charging her late fees.
“People should be cautious and think twice before cashing out,” Han said. “It happened once and it scared me for life.”
