Hidden costs? Will I overspend? Grab responds to questions S’poreans have about ‘Buy Now, Pay Later’ model

The ‘Buy Now, Pay Later’ model is becoming increasingly popular in Singapore.

For those of you who may be unfamiliar with what that is, basically it is a payment system that allows you to buy what you want now and pay for it later in installments.

Kind of like an installment scheme that’s similar to what credit cards offer.

PayLater by Grab is a service by Grab that allows consumers to purchase and spread their payments to manage their cash flow.

While this method of shopping and payment is now commonplace in Singapore, users might still have some lingering doubts regarding the whole model.

In light of this, we decided to crowdsource questions readers might have about the “Buy Now, Pay Later” model and get Lim Kell Jay, the Head of Grab Financial Group Singapore, to answer them.

Here’s what we gathered.

1) Is PayLater like a loan?

PayLater is not like a loan.

According to Lim, PayLater exists so consumers have the flexibility to purchase what they need and spread their payments to manage their cash flow.

“It is not an avenue to increase debt.”

Lim says that there are currently two ways to pay with PayLater by Grab:

• Pay in four monthly instalments: Shoppers can split their purchases into four payments and pay ¼ of the total bill at checkout
• Pay everything the next month: Shoppers can track their monthly spend and pay for it all in one bill the following month.

You also earn GrabRewards points in all PayLater purchases.

2) Is there interest or any hidden costs?

“With PayLater, you’ll only pay the price of what you purchase,” Lim says.

“There’s no interest, no upfront costs, and no fees as long as you pay on time. There’s only one charge if you miss a scheduled payment – a flat S$10 admin fee to reactivate your suspended PayLater account. However, this can go up to S$30 if all three payments are missed.”

However, Lim is also quick to point out that Grab has designed the following features for users to avoid late payments and encourage responsible spending:

• Personalised spend limit based on historical buying and payment behaviour
• Automatic payment enablement so you don’t miss a scheduled payment
• Spending and payment due date tracker within the app
• Spend notifications, bill reminders, and alerts to keep you informed at every step

3) How does the company make money if it’s 0 per cent interest?

“‘A happy shopper is a happy merchant’ - that’s the core ethos at PayLater,” says Lim.

“While consumers do not have to pay additional fees for using the PayLater service, e-Commerce merchants who offer PayLater as a payment option pay a commission to Grab.”

According to Lim, e-Commerce merchants who offer PayLater may observe the following business growth trends:

• Higher average order value
• Higher checkout conversion rates
• New shoppers
• Low risk as Grab takes on the risk while they get paid upfront daily

These merchants may also get various opportunities to take part in dedicated campaigns on Grab to drive sales and customer acquisition.

4) What if the price increases after you buy the item? Will you have to pay the increased amount?

“The price that a consumer pays is fixed upon the point of purchase,” Lim replies.

“For example, if a customer bought a Secretlab chair during a sale at S$450 (originally S$600), the four payments they have to make will be 1/4 of S$450 (not 1/4 of S$600) even if the chair goes back to the original price after the purchase.”

5) What happens if you fail to pay the installment in time?

“Grab has various guardrails in place to enable and encourage healthy spending habits and keep you from overspending,” says Lim.

“When you miss a payment, your PayLater account will be temporarily deactivated to prevent you from spending more. This keeps you in control of how much you owe, which also means things won’t snowball.”

According to Lim, other efforts by Grab include:

• Personalising your spend limit so you can keep your spending under control

  • Looking at many factors - including how long you’ve been on the Grab platform and how much you’ve spent on Grab - we set an appropriate PayLater available amount (akin to a purchase limit) for you to use

• Inbuilt features to help you stay on top of your expenses

  • Enable automatic payment from your GrabPay wallet or linked card so you don’t miss a scheduled payment
  • Keep track of spending and payment due dates at a glance within the app
  • Budget easily through our consolidated monthly bill
  • Spend notifications, bill reminders, and alerts to keep you informed at every step

Unlike credit cards, Grab also prevents debt spiral in the following ways:

6) What other advantages are there besides paying in installments?

“With PayLater by Grab, shoppers can buy bigger ticket items without dipping into their savings or using a credit card,” Lim states.

“Consumers can use PayLater as a budgeting tool to ease cash flow and manage their spending (e.g. manage renovation budget, wanting to treat yourself while keeping within your monthly budget).

“It is super simple to use as you can check out in three taps and there is no need to memorise anything,” Lim elaborates.

“Simply choose to checkout with Grab, key in the OTP sent to your mobile and select PayLater as your payment method.”

Grab also partners with merchants to offer exclusive discounts and promotions for purchases made with PayLater.

Check out the latest deals here.

Win 1,000,000 GrabRewards Points (worth S$2,000)

From now to October 13, order the latest iPhone13 with PayLater by Grab at iStudio to save S$20 off with the promo code GPAYLATER20 (min. spend S$500).

Additionally, one lucky winner will walk away with one million GrabRewards points in the million-point lucky draw.

Enter automatically when you pay with PayLater by Grab at iStudio from now to November 20, 2021.

Find out more here. Terms and conditions apply.

This article is sponsored by Grab.

Top image via Grab