Buy Now, Pay Later on $3 Bubble Tea Highlights Thai Debt Concerns -

Instalment plans for everything from bubble tea to chicken rice have captured the attention of Thailand’s central bank governor.

Governor Vitai Ratanakorn is taking measures to control the rapid growth of buy-now-pay-later services, which increasingly allow consumers to break down everyday expenses into instalments. He is worried that the easy access to digital credit is encouraging borrowing in a nation that already has one of the highest levels of household debt in Asia.

“There are purchases that shouldn’t be made on credit, whether it’s a 106-baht ($3) bubble tea or a 50-baht plate of chicken rice,” Vitai expressed to reporters at a recent press gathering in Bangkok. “We might have crossed a boundary—when people start financing small items, it cultivates a habit of spending money they don’t really have.”

Vitai Ratanakorn. Image: Valeria Mongelli/Bloomberg

Thai household debt hovers around 87% of gross domestic product, which is significant compared to the rest of the region and is mainly supported by consumer spending rather than housing, which typically serves as a value reserve. This scenario leaves families with minimal safety nets against economic downturns, rendering debt one of Thailand’s serious economic vulnerabilities.

For years, the weight of debt has hampered consumer spending and complicated efforts for growth recovery. The swift rise of buy-now-pay-later options raises concerns that it may intensify an already challenging situation. Vitai estimates the number of BNPL accounts reached approximately 6 million last year, marking nearly a tenfold increase since 2021.

This boom is fueled by Thailand’s rapid acceptance of e-commerce and digital payment systems. Shoppers online or using applications can easily opt for a pay-later option during checkout to split their purchases into instalments. Approval standards are generally less stringent than those for credit cards or conventional loans.

While several BNPL services advertise zero interest for repayment terms of one to three months, longer instalment plans can incur annual interest rates as high as 25%. Additionally, users might face fees and penalties for delayed or missed payments.

About 40% of Thais, roughly 25.5 million people, carry debt. This figure climbs to approximately half among individuals aged 20 to 35, a group that also accounts for over a quarter of non-performing loans, raising alarms about debt accumulation among the youth.

For 23-year-old Thanwadee Kunasut, BNPL became vital shortly after starting her first job. She has used the service to break down the cost of a 200-baht mala hotpot meal over three months and now relies on it for various purchases, including groceries, cosmetics, and household supplies.

“It helps when I’m short on cash,” she said. “I’d rather not borrow from my mom, so it offers some flexibility.”

As her usage increased, her credit limit expanded from 6,000 baht to 14,000 baht. Currently, about 2,000 baht of her 17,000-baht monthly salary is dedicated to debt repayments.

“It certainly makes spending more enticing,” she noted.

Thanwadee is among the more than a million users of Shopee, one of Thailand’s largest BNPL providers. Shopee Thailand opted not to comment.

Luxmon Attapich, CEO of the National Credit Bureau Co., estimates that most users are in their 20s and 30s, younger than the typical 30-50 age group for standard personal loans.

“BNPL is increasingly becoming a part of daily life for younger consumers,” Luxmon stated. “However, financial literacy has not developed alongside the increased access to credit.”

The Bank of Thailand is in the process of formulating regulations for BNPL providers offering instalment loans through online platforms, Vitai announced on June 2. Proposed regulations include age and income restrictions, limits on eligible items, minimum purchase amounts, and caps on fees. These regulations are anticipated by the end of the year.

Atome, another BNPL provider, expressed support for a clearer regulatory framework. “We view BNPL as a financial management tool rather than merely a spending stimulant,” the company stated. “When used responsibly, it helps consumers manage their cash flow and plan their expenditures.”

‘Long-term pain’

The central bank’s focus comes at a time of renewed financial pressure for Thai households. The average monthly household income decreased by 2.5% last year to 28,308 baht, marking the first drop since 2019, according to the National Statistical Office, while spending fell by 5.4%.

Economists suggest that BNPL illustrates both the ease of digital credit access and the significant stress on household finances.

“It’s short-term gain and long-term pain,” explained Thitima Chucherd, head of economic and financial market research at Siam Commercial Bank Pcl. “It may help individuals navigate short-term cash shortages, but it can also encourage unnecessary spending and create debt that burdens future expenses.”

Regulating BNPL may lessen the risks, but addressing the underlying issues requires improving income growth and enhancing financial literacy, she added.

For some users, however, the service has already become integral to daily financial management. Ratree Tangjaiyoo, a 37-year-old office worker earning around 30,000 baht a month, recently utilized BNPL to purchase a 40-baht matcha drink over three months.

“I choose instalments when I expect to run low on cash or when I wish to reserve funds for other necessities,” she explained. “It makes expenses feel more manageable.”