By Dr. Wan Khatina Nawawi
Law protects what it understands. And to understand credit today, we must first understand behaviour.
This article is part of the Truth and Accountability series, which explores how rules, systems and market practices align, or fail to align, with what people actually see, understand and experience.
When it comes to credit, truth is not just in the terms and conditions. It is in the interface, the timing and the design. And accountability is not just about setting rules. It is about ensuring that those rules lead to better outcomes.
This piece examines how credit cards and BNPL products are framed, how regulation is adapting, and why understanding behaviour is now central to protecting consumers.
Credit is changing faster than regulation
For decades, credit cards shaped how consumers borrowed. They offered a preset limit, monthly billing, and a familiar mix of control and risk. But today, the way credit is delivered and experienced is changing. Consumers now encounter new forms of credit that are faster, simpler and embedded directly into the checkout process. Among them, Buy Now Pay Later, or BNPL, has become one of the most prominent. It turns borrowing into a tap, an instalment plan, or a prompt that appears mid-purchase. This shift is not just technological. It is behavioural. And it raises important questions for how we regulate credit in Malaysia today.
BNPL versus credit cards: Same purpose, different experience
Both credit cards and BNPL allow consumers to delay payment. But the experience of using them is very different.
Credit cards are applied for in advance. Limits are fixed, and repayments occur monthly, with options to pay in full or revolve. Statements are sent. Interest is charged on outstanding balances. The experience, though often confusing, still carries the weight of a formal financial decision.
BNPL, in contrast, is immediate and embedded. Users are offered instalment options at the point of purchase. No separate loan agreement is required. For smaller amounts, approval is instant. Repayments are auto deducted. There is no card, no minimum payment, and often no sense of crossing a financial threshold.
The result is a shift in how consumers perceive risk and obligation. BNPL appears seamless and manageable. A purchase split into three payments feels easier to justify. There is no large upfront amount and no monthly interest to calculate. But the simplicity hides complexity. Multiple BNPL purchases across platforms can create overlapping repayment schedules, fragmented obligations and eventual distress.
The same shift is also happening within the credit card experience. Many cards are now used in digital form only. They are stored in apps, activated via mobile wallets and used without ever handling a physical card. This, too, changes behaviour. Payments become faster and more automatic. The friction of pulling out a card or signing slips is gone. The pain of paying is reduced. Without paper statements or visible reminders, users may lose track of their total spending. And because digital cards are linked across apps, purchases become disaggregated. Consumers may not see the full picture.
From a behavioural perspective, the difference lies in framing, friction, and feedback. BNPL and digital credit cards both reduce the cues that usually signal a credit decision. They make borrowing feel like a payment. That makes it easier to say yes and harder to monitor what happens next.
A better understanding of behaviour is starting to shape regulation
BNM has taken important steps to improve how consumers engage with credit, starting with credit cards. Its 2019 Policy Document on Credit Card incorporates the application of behavioural thinking to repayment decisions.
Monthly statements are now required to include warnings about the long-term cost of making only minimum payments. These warnings must be clearly formatted and positioned for visibility. Time-to-repay charts are also mandatory, showing how long it would take to pay off a balance under different payment levels. These features aim to address the problem of salience. Consumers tend to focus on what is immediate and easy while overlooking future consequences.
Another key reform is the Automatic Balance Conversion (ABC) programme. This applies to cardholders who revolve their credit for more than a year and earn under RM60,000 annually. For these individuals, banks must offer a structured repayment plan that converts the revolving balance into a term loan. The design includes a cooling-off period, upfront disclosure, and a shift toward fixed repayments.
This programme is meant to help consumers who are affected by inertia and present bias. Many users intend to repay in full but delay doing so. Others consistently choose short-term flexibility even when it results in long-term costs. By offering a simpler and more predictable alternative, the policy nudges vulnerable borrowers toward better outcomes.
Still, these improvements depend on assumptions about user attention and comprehension. They rely on warnings being noticed and graphs being understood. But when attention is low or users are under stress, those assumptions may not hold. The consumers most at risk may not respond to information in the way policy intends.
BNPL regulation goes further, but only part of the way
Meanwhile, the 2023 BNM Policy Document on Personal Financing applies behavioural insights more systematically to BNPL products offered by licensed financial institutions. This policy focuses on the moment of credit uptake, where decisions are often made quickly and with little reflection.
The policy prohibits BNPL offers from being pre-approved or pre-selected at checkout. Merchants cannot make BNPL the default payment option. These measures respond to status quo bias. When a payment option is offered by default, consumers are more likely to accept it without active consideration.
The policy also requires affordability assessments once a user’s cumulative BNPL exposure exceeds RM1,500. This seeks to address overconfidence, where consumers underestimate the risks of multiple overlapping payments.
BNPL accounts must be suspended after three missed payments. Late charges must reflect actual recovery costs and avoid compounding. These measures introduce consequence and friction at the point of financial stress. They remind users that digital credit still carries obligations.
To support credit assessment, providers are allowed to use telco and utility bill payment history for users with no formal credit record. This allows for broader inclusion without lowering prudential standards.
BNPL use must also be reported to CCRIS. This gives lenders and consumers a clearer view of debt obligations and helps prevent hidden exposure.
Together, these measures show that policy is beginning to reflect behavioural realities. The focus is no longer just on what is permitted or prohibited, but also on how credit is presented, when it is accepted, and how repayment is supported. However, these rules apply only to BNPL providers supervised by BNM. Many large BNPL platforms operate outside this scope.
The Consumer Credit Bill 2025, which had its first reading at the Parliament in March 2025, is meant to address this gap. It establishes a single framework for all non-bank credit providers. It includes basic requirements for conduct, affordability and redress. But it does not yet address the behavioural design of credit offers. It does not provide standards for how credit is presented on screen, how prompts are timed, or how users are guided through terms. These details will be shaped by future rules issued by the Consumer Credit Commission.
The framework is welcome. But it will only be effective if these future standards account for how users actually encounter and experience credit.
Behavioural regulation still has a long way to go
Despite these advances, key behavioural risks remain unaddressed in current and proposed credit regulation.
First, disclosures are not tested for comprehension. Regulations specify what must be shown, but not whether consumers understand it. Time-to-repay charts and payment warnings only help if users notice and act on them. At present, there is no requirement for consumer testing.
Second, the structure and presentation of digital interfaces are not regulated. Yet this is where most credit decisions now begin. There are no rules about the placement, size or visibility of repayment options, nor about the wording of defaults or prompts.
Third, cumulative credit exposure is assessed in isolation. Consumers may appear creditworthy to each provider but be overextended in practice. No system exists to monitor aggregate exposure across platforms.
Fourth, behavioural segmentation is applied too late. The ABC programme is offered only after long-term debt has set in. The same principles could be used earlier to prompt better choices, such as switching to fixed repayment plans or receiving spending summaries.
Finally, there is little effort to measure outcomes. Most regulatory focus remains on whether institutions comply with rules. There is less attention to whether users are making better decisions or avoiding financial distress. Without that feedback, regulation risks becoming performative rather than protective.
Seeing regulation through the users’ eyes
Credit is a tool. It allows households to smooth spending, manage cash flow and access essential goods and services. But when misunderstood or misused, it can lead to overspending, instability and long-term strain.
Good regulation reduces these risks. It sets boundaries, improves transparency and provides safeguards. But it must also reflect how decisions are actually made. People do not borrow by reading clauses. They borrow by clicking, tapping and reacting to prompts. Behavioural economics helps us understand where rules fall short, how defaults influence decisions, and why disclosure alone is not enough.
This does not mean every screen must be regulated. But it does mean that how credit is framed, timed and delivered should matter as much as what is offered. A disclosure that is unread is not protection. A default that leads to debt is not neutral.
The future of credit regulation will be shaped not only in legislation, but in the interfaces people use and the experiences they have. If Malaysia wants a credit system that is safe, fair and resilient, its policies must align with how people actually decide, not just what they are told to do.