Towards Responsible Consumption and True Financial Inclusion: Assessing Fintech Buy-Now, Pay-Later (BNPL) from an Islamic Perspective

The last three years have seen more widespread adoption of point-of-sale financing from financial technology (fintech) companies. Known as buy-now, pay-later (BNPL), this new form of consumer lending is now more widely available in the checkout process online, and is becoming more common in stores as well. With both interest-free and interest-bearing installment loans, BNPL has resonated among credit card averse consumers as well as those with insufficient or poor credit history. With easier access to credit, this form of point-of-sale financing makes up less than 5% of payment transaction value globally, yet is projected to be the fastest growing global payment method in the coming years. As financial service providers evaluate the demand for BNPL, there is a need for assessing the various BNPL business models from an Islamic perspective such that shariah compliant models may be properly developed to service Muslim consumers and others who wish to avoid interest. In addition to assessing the fintech and bank-based BNPL business models from an Islamic legal perspective, this research determines that certain interest-free BNPL models are more shariah-compliant consumer financing options for Muslim consumers compared to interest-bearing conventional credit cards, and, at times, Islamic credit cards. The discussion offers recommendations for Islamic maslaha and consumer-centered fintech models, as well as some recommendations for installment plans through Islamic credit cards in the Gulf region. This research finds that encouraging the application of BNPL through fintech in non-retail spending categories, such as healthcare, education, and B2B BNPL will assist in achieving the higher objectives of Islamic finance by helping consumers firstly avoid paying interest while also having access to credit that can achieve the essential objectives of Islamic law.