UAE: Do buy-now-pay-later apps encourage higher spending? Expert explains
In recent years, the rise of has transformed how consumers approach shopping, enabling them to make purchases and pay in instalments. However, this convenience has sparked a debate among experts about whether these services encourage higher spending and the potential implications for consumers' financial habits.
Many banks provide the option to pay in interest-free instalments, often called 'buy now, pay later' (BNPL) plans. This allows customers to purchase and spread the cost over a set period without incurring interest charges, provided they adhere to the repayment schedule.
Dr Ben Lebig, value chain mid-term strategist, Chevron, weighed in on this growing trend. "The 'buy-now-pay-later' apps have become widely used in the UAE among various communities,” he said. "While the intent has been to make high value purchases become more affordable by various months, the use of these apps has evolved into something else.”
Dr Ben also mentioned that these apps have promoted impulsive buying because the financial impact is not felt immediately. He witnessed many, who in the past would not buy something they couldn't afford, but because of the instalment payment using these apps, are now .
However, he warned that continuously relying on these apps could result in accumulation of debt that builds up over time. "These apps create a false impression that everything is affordable, hence creating a habit of impulse buying and the danger of spending beyond their means." Dr Ben explained. "Consumers should always be conscious of their use on these apps through detailed tracking of spending while comparing it with their monthly income."
Dr Ben Lebig. Photo: Supplied
Mixed experiencesUsers across the UAE have shared mixed experiences with these services. Abdullah Karama Al Zubaidi from Abu Dhabi thinks these apps are double-edged swords. ”They can facilitate essential purchases, but they can also lead to a bad habit of buying unnecessary luxuries," Al Zubaidi said.
Ahmed Salem, also from Abu Dhabi, noted the benefits of BNPL apps, saying, "The programme is excellent and helps a lot with purchases, especially if a person cannot afford to pay the full amount at once,” said Salem. However, he sought Islamic guidance on the use of these apps.
Heba, a resident of Dubai, expressed her concerns: "I closed it because debts accumulated. One tends to purchase without awareness, and by the time the pay cheque arrives, most of it goes to its instalments in the first week."
Afaf Haddad from Abu Dhabi echoed similar sentiments, "These programmes facilitate the instalment process for consumers, but I consider them a trick that makes people take the easy route of instalment buying for more expensive items. In the end, most of the salary goes towards this."
As the popularity of buy-now-pay-later apps continues to grow, it remains essential for consumers to strike a balance between convenience and responsible financial management.
Ultimately, understanding the implications of these services can empower individuals to make informed purchasing decisions and avoid falling into the trap of excessive spending.