The proliferation of installment payment plans for everything from milk tea to chicken rice has drawn the attention of Thailand's central bank governor.
Governor Vitai Ratanakorn is taking steps to curb the rapid growth of "buy now, pay later" services, which are increasingly allowing consumers to split payments for everyday purchases. He worries that easy digital credit is encouraging borrowing in a country where household debt levels are already among the highest in Asia.
"Some things should not be bought with credit at all, whether it's a 106-baht (US$3) milk tea or a 50-baht chicken rice," Vitai told reporters at a recent press conference in Bangkok. "We may be going too far — when people start borrowing for small expenses, they develop a habit of spending money they don't have."
Thai household debt stands at about 87% of gross domestic product, a ratio that is high relative to other countries in the region and is unusually skewed towards consumption spending rather than housing, which can act as a store of value. This leaves Thai people with a lack of buffer against economic shocks, making debt one of the nation's largest economic vulnerabilities.
For years, the heavy debt burden has been dampening consumption and hindering economic recovery. There are concerns that the swift adoption of BNPL services could worsen this entrenched problem. Vitai estimates the number of BNPL accounts surged to about 6 million last year, roughly ten times the figure from 2021.
This boom has been fueled by the rapid adoption of e-commerce and digital payments in Thailand. When shopping online or paying via mobile apps, consumers can select a BNPL option at checkout, splitting the purchase amount into installments with just a few taps on their phone. Eligibility requirements for BNPL are often more lenient compared to credit cards or traditional loans.
While many BNPL plans advertise zero interest for repayment periods of 1 to 3 months, longer-term installment plans can carry annual percentage rates as high as 25%. Consumers also face fees and penalties for non-payment or late payments.
Nearly 40% of Thais, or about 25.5 million people, carry debt. Among those aged 20 to 35, this ratio rises to about half. This age group accounts for more than a quarter of non-performing loans, highlighting concerns about debt accumulation in early adulthood.
On June 2, Vitai stated that the central bank is formulating rules for service providers offering BNPL installment loans through online platforms. Proposed measures include restrictions based on age and income, limits on eligible products, a minimum purchase amount, and a cap on fees. These rules are expected to be issued before the end of the year.
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