Indonesia's bank paylater growth slows to 26.68% in September as finance-company BNPL arrears edge up

Implications for lenders

Finance-company BNPL arrears rose to 3.12% as the book shrank, so lenders may want to monitor arrears by origination month rather than against a shrinking total. With bank paylater growth slowing to 26.68% and OJK sanctioning 11 online lenders in October, partners may also review compliance and collection practices in their BNPL and platform channels.

Implications

Facts

At its monthly press conference on 5 November, the Financial Services Authority (OJK) said bank paylater credit, as recorded in its SLIK credit-information system, reached IDR 31.50 trn in September, up 0.27% from August. ¹ Annual growth slowed to 26.68%, down from 29.10% in August. ² The number of bank paylater accounts was about 34.5 million, up from about 34 million in August. ³ OJK did not give a non-performing loan ratio for bank paylater.

Agusman, OJK's chief executive for supervision of finance companies, venture capital, microfinance and other financial institutions, said finance companies' BNPL financing was IDR 13.54 trn, down from IDR 13.61 trn in August, ⁴ up 31.35% year on year, down from 36.57% in August and 54.65% in July. ⁵ The gross non-performing financing ratio of that BNPL book was 3.12%, up from 3.03% in August. ⁶ OJK also stated online lending's TWP90 ratio of 5.36% as of September. ⁷

In October OJK imposed administrative sanctions on 11 finance companies ⁸ and on 11 online lending platforms ⁹ as well as on venture-capital, pawn and special financial companies. The sanctions comprised 14 fines ¹⁰ and 54 written warnings. ¹¹

Analysis

Time series: bank paylater growth has slowed every month since May, from 37.72% in May to 26.68% in September (chart), while the stock has stayed close to its July level of IDR 31.56 trn. Accounts keep rising, so the slowdown reflects smaller balances per account rather than fewer users. Finance companies' BNPL has gone further: the book fell from IDR 13.62 trn in July to IDR 13.54 trn, and annual growth dropped from 54.65% to 31.35% in two months. A shrinking book raises arrears ratios mechanically, which is part of why the NPF moved to 3.12%.

Across Indonesia's unsecured segments, the September pattern is consistent: growth is slowing while arrears ratios rise, in finance-company BNPL as in online lending, where TWP90 is 5.36%, above OJK's 5% threshold. Cross-country, with different products and definitions: in the Philippines, banks' credit card loans grew 23.3% in August and consumer loans 16.2% in September, so short-term unsecured credit there is still expanding faster than Indonesian bank paylater.

Sanction counts swing from month to month: online lenders sanctioned went from 34 in August to 11 in October, so a single month says little about the trend in supervision.

Counterpoints and uncertainties

The figures were given at OJK's press conference; OJK's published monthly statistics may differ slightly. OJK does not disclose an arrears ratio for bank paylater, so the credit quality of the larger bank book is not visible. One month's rise in finance-company BNPL NPF can reverse with write-offs or restructuring.