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By Lee Min-hyung
The delinquency rate of “buy now, pay later” (BNPL) services offered by the nation's three big tech firms ― Naver Financial, Kakao Pay and Viva Republica ― is on a sharp rise due to the economic slump and prolonged high interest rates, data showed Thursday.
According to data submitted to Rep. Choi Seung-jae of the ruling People Power Party, Toss' delinquency rate for its BNPL service reached 5 percent in March. Toss is a money transfer app operated by Viva Republica. The figure soared steeply in only about three months after reporting 3.48 percent as of the end of 2022.
Naver Financial's rate was second-highest with 2.7 percent in March, up 1.44 percentage points from the end of last year. Kakao Pay's delinquency rate came in at 0.51 percent, up more than five times during the same period, according to data Choi's office compiled from the Financial Supervisory Service.
The rise was attributable to slowing economic growth and high interest rates. The overall delinquency rate across the financial industry has been rising gradually, but for big tech firms the rise has been even sharper. Shinhan Card's delinquency rates, for instance, rose to 1.37 percent as of the end of March, up 0.49 percentage points from a year earlier.
The BNPL service is a kind of short-term financing for customers with low credit ratings. Unlike credit cards, those not eligible for credit cards can pay for products in installments over time by using the service.
Choi urged the financial authorities to enhance monitoring and supervision of the rising delinquency rates of emerging fintech players.
“The number of accumulated subscribers to BNPL services soared to around 3 million within a year after its launch here, but its delinquency rate is also rising at an alarming pace,” Choi said. “Watchdogs need to discuss regulatory and supervisory measures with heightened vigilance against the soaring delinquency.”
There is growing demand for card and financial firms to be allowed to share information on any BNPL customers' records of delinquency. For now, financial firms do not share BNPL users' delinquency information with one another, raising woes that some customers may continue delaying payments with little consequence.
But the financial authorities are not considering such actions, as such moves would taint the original purpose of the service. They have allowed BNPLs in the name of “inclusive finance” for customers with low credit ratings.