In Indonesia, where credit card penetration is not active, the insolvency rate is also soaring as pre-purchase BNPL payments through electronic wallets are rapidly spreading. In particular, there are concerns that they could fall into a debt trap as people in their 20s, who are new to society, account for half of their bad debts.
According to the Indonesian Financial Supervisory Service (OJK) on the 20th (local time), the credit card penetration rate in Indonesia, which has a population of about 280 million, is only around 5%.
However, the penetration rate of smartphones has reached 75%, and the use of electronic wallets through smartphone apps is also increasing rapidly, while BNPL services are also increasing.
Unlike credit cards that prove income and require credit scores, BNPL can also use credit services with resident registration information, mobile phone numbers, and email addresses if you have a smartphone.
Thanks to these advantages, the number of BNPL service users in Indonesia was 72.88 million as of May, up 33% from a year ago.
By age, those in their 20s accounted for the most with 47.8%, followed by those in their 30s, 40s, and under 20s.
The annual amount of use was 26.14 trillion rupiah (about 2.26 trillion won) from May last year to the end of April this year, up 61.3% from the same period last year. According to global market research firm Research & Market, the BNPL market in Indonesia is expected to grow at an annual average of 32.5% by 2028 to $25.3 billion (about 33.6 trillion won) by 2028.
However, as the BNPL market grows, the delinquency rate is also rising in Indonesia
In the first half of this year, the ratio of bad loans (NPL) to BNPL loans reached 6.78%. Compared to the bank’s NPL ratio (2.44%), it is about three times higher.
In particular, half of all NPLs are accounted for by those in their 20s, who are new to society.
OJK believes that individual insolvency is not serious because the amount of loans that can be received through BNPL is not large.
The problem lies in the lack of awareness that people in their 20s must pay back after receiving such credit services. They say they take delinquency lightly because they still lack the concept of credit management.
OJK warned that these overdue records are all recorded in individual credit databases (DBs), which may make it impossible to borrow when buying a car or house in the future and could even be disadvantaged in employment.
