Kazakhstan’s surging buy-now-pay-later (BNPL) schemes are raising regulatory alarms over inflation and consumer indebtedness. Leading fintech firm Kaspi.kz accounts for a significant share of the BNPL market, which has seen substantial growth. Concerns are mounting about the growing debt among consumers and calls for stricter regulations to ensure transparency and protect market competitiveness.
Kazakhstan is witnessing a significant rise in buy-now-pay-later (BNPL) schemes, which are becoming increasingly popular among consumers but causing regulatory concerns over inflation and consumer debt. BNPL offers short-term loans at low or no interest rates, thriving in Kazakhstan’s growing e-commerce sector. However, officials are beginning to scrutinize the negative implications of this trend for the country’s financial stability.
Kazakhstan is currently experiencing a boom in BNPL services, with major players like Kaspi.kz dominating the market. The fintech company reported that BNPL is a vital product, representing nearly half of its annual lending. By September 2024, BNPL portfolios held by Kazakh lenders had reached KZT2.3 trillion ($4.5 billion), marking a year-to-date increase of 17%. This growth highlights a broader trend in the region’s fintech landscape.
The global BNPL market is anticipated to expand significantly; it was valued at $141.8 billion in 2021 and is expected to grow at a 33% compound annual growth rate (CAGR) through 2026. In Kazakhstan, the agency overseeing the financial market has highlighted potential inflationary pressures linked to BNPL financing practices. Local experts warn that easy access to this credit may lead to rising household debt levels and increased financial distress among consumers.
Reports indicate that BNPL products may constitute 50% of all consumer loans in Kazakhstan. Consumer lending has surged by 34-42% annually, likely driven by the availability of BNPL options. This increased lending poses risks as banks began extending credit to higher-risk borrowers, which may result in increased loan defaults in the future.
Experts advocate for stricter regulation of consumer lending, particularly regarding BNPL and interest-free loans. Concerns exist over how these agreements inflate product prices, misleading consumers into believing they are getting a better deal. Without transparency, borrowers may not realize the true costs associated with these financing products.
Consumer advocation has grown for the need to disclose hidden fees within BNPL products. The head of the regulatory authority noted the negative impact of inflated prices on cash buyers, while an op-ed stressed the absence of effective oversight in the BNPL sector. Consumers are often drawn to installment plans, mistaking them for advantageous options without understanding the more considerable costs at play.
Despite criticism, BNPL remains popular among both consumers and retailers, with many vendors experiencing significant sales declines without the financing option. A study from the Bank of International Settlements identified that BNPL users tend to be younger, more indebted, and less educated, which presents concerns regarding their financial literacy.
The synergy between rising inflation and BNPL demand poses a risk for Kazakhstan’s economy, potentially leading to a cycle of increasing debt levels among consumers. Industry leaders recognize the implications of high-interest rates and predicted revenue impacts as consumer spending declines due to inflationary pressures. Supporting regulation in the BNPL sector could benefit consumers and providers alike, ensuring fair practices and price transparency within the market.
Kazakhstan’s financial authorities are currently working on measures to regulate BNPL schemes and enhance price competitiveness in cash payments, although the competition regulator’s position on these changes remains unclear. This developing situation calls for ongoing scrutiny as the market evolves under growing economic pressure.
Kazakhstan’s increasing adoption of BNPL schemes presents both opportunities and risks, particularly concerning inflation and consumer debt levels. The regulatory focus on BNPL highlights the need for transparency and protection for consumers. While BNPL remains attractive to many, effective oversight is critical to ensuring it does not contribute to a cycle of financial instability. The collaboration between financial and competition regulators aims to improve market practices, but the full impact of these changes remains to be seen.
Original Source: www.intellinews.com
