Buy Now, Pay Later and Over-Indebtedness: Behavioral Evidence From Malaysian Consumers

Buy Now, Pay Later (BNPL) schemes have rapidly gained popularity as a consumer credit option, raising concerns over rising levels of over-indebtedness. While existing research highlights financial risks associated with BNPL, limited attention has been given to the role of behavioral biases in influencing consumer borrowing behavior. This study investigates the impact of four cognitive biases—self-control bias, overconfidence, mental accounting, and availability bias—on the level of over-indebtedness among BNPL users in Malaysia. Drawing on survey data from 200 individuals with active BNPL loans, the findings reveal that self-control bias is significantly associated with higher debt accumulation. Conversely, overconfidence and mental accounting are linked to lower levels of indebtedness. Availability bias, however, adversely affects repayment behavior, contributing to financial strain. The study underscores the importance of incorporating behavioral insights into financial literacy initiatives, with particular emphasis on improving self-control mechanisms among consumers. Policy recommendations are proposed for Malaysian regulators to strengthen consumer protection frameworks and reduce indebtedness risks associated with BNPL usage. By integrating behavioral perspectives into financial education and regulatory policies, this research contributes to more effective interventions aimed at promoting responsible credit use and enhancing consumer financial well-being.