SEA's tech giants revel in lending boom, but major test looms

Business Times

11-05-2025

NANDA Sekar, a homemaker from the Indonesian city of Bogor, is a frequent user of BNPL services on platforms like Shopee, Gojek, and Tiket. Doing so lets her manage expenses so they 'don't pile up.'
But there's also the discounts – since platforms are still focused on growth, using BNPL can be cheaper than paying in full. Sekar uses it not just for one-off big purchases like plane tickets, but also for monthly necessities.
In Indonesia, there are many users like Sekar. Outstanding BNPL debt in the multifinance sector – which includes fintech and non-fintech providers – reached 8.2 trillion rupiah (US$485 million) as of February, up 59 per cent year on year (YoY).
This has driven a lending boom for Southeast Asia's tech giants.
Sea Group's fintech arm, SeaMoney, saw its loan book for Q4 2024 surpass US$5 billion, which was a 60 per cent YoY growth. Similarly, Grab recorded a 36 per cent YoY revenue increase in Q1 2025, while GoTo Financial – whose loan book grew 108 per cent YoY – achieved positive adjusted EBITDA for the second consecutive quarter.
But a big test may be approaching.
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Across many markets, including in Southeast Asia, ballooning consumer debt and increased buy now, pay later (BNPL) usage is colliding with a global economic slowdown. That has raised concerns about a debt trap, and not just for the younger consumers that BNPL platforms typically target.
'A macro wobble, say gig-worker layoffs or a spike in living costs, would test just how thin borrowers' safety nets really are,' Singapore-based industry analyst Zennon Kapron tells Tech in Asia.
Alarm bells ringing?
In the past two years, BNPL has seen users shift from the younger generation to older age groups. Fintech firm Kredivo, for instance, recorded consistent YoY growth in users over 36 years old, reaching 39 per cent as of September 2024.
The company also noted that transactions during this year's Ramadan period were dominated by users who were 30 and above.
This rise comes as a wave of layoffs have hit several Indonesian industries: According to data from Indonesia's Ministry of Manpower, more than 18,000 people were laid off in the first two months of 2025 alone.
Though it's not immediately clear whether the two are linked, Nailul Huda, director of digital economy at Jakarta-based insights firm Celios, says that 'this shift is driven by rising needs but weakened economic conditions.'
So far, credit quality is showing minimal signs of stress. The country's gross non-performing loan (NPL) rate rose from 3.37 per cent in January to 3.68 per cent in February.
Still, there are concerns that this could worsen, especially amid the present macroeconomic conditions.
'Current default rates look calm largely because balances are young and ticket sizes small,' Kapron points out.
Independent economist Gundy Cahyadi notes that the gradual increase in the country's NPL rate could serve as an alarm bell if it 'more than doubles' within the next year. However, he agrees that as it is, BNPL's current value is relatively small – thus limiting the risk it would pose to the country's overall financial system.
There are concerns that many people affected by layoffs might turn to BNPL or loans just to 'make ends meet.' However, not everyone who uses such services does so out of financial desperation, he says.
BNPL's issues aside, it's clear that the service is fulfilling consumer demand – especially in countries with low credit penetration like Indonesia or the Philippines.
Both countries have lower household debt-to-GDP ratios compared to more developed parts of Southeast Asia, which Cahyadi says is partly due to limited access to credit. Countries like the US and China have ratios of 70 per cent and 62 per cent, respectively.
Part of the problem is the general lack of credit histories, which BNPL helps to solve. In Indonesia, pay-later loans are recorded in the country's Financial Information Service System, thus contributing to a user's credit score.
On the flipside, this means missed BNPL payments, which may not seem like a big deal, can hurt a user's rating. This could eventually make it more difficult for them to secure bigger-ticket financing, like a mortgage for a house.
'We [at Celios] are not anti-debt,' Huda emphasizes. 'But we are cautious of signs that point to unproductive and excessive consumerism.'
Age isn't just a number
Even with the boom, lending apps as well as BNPL providers have felt headwinds of late. On the whole, players linked to either an ecommerce or fintech platform have fared better than pure-play BNPL providers.
The reason is obvious: These bigger platforms can count on their vast ecosystems to provide large data points on every borrower.
As Forrest Li, Sea Group's chief executive, illustrated in the company's Q4 2024 earnings call, SPayLater purchases within Shopee's marketplace are a 'first and very natural touch point' that lets borrowers build an initial credit track record.
'Once we understand users' credit behavior, we give them access to other products with longer tenures and larger quantums,' he said. 'And when we have built a credit risk model for each market which we feel confident of, we then start to scale our loan book.'
But promoting responsible borrowing has become more urgent for these platforms – and not just because many users are first-time borrowers. As the likes of SeaMoney scale, they are also increasingly targeting borrowers outside their ecosystems.
'Across our Asia markets, off-Shopee loans now account for about half of our loan book,' Li said during the earnings call. 'In 2025, we expect loan book size to grow meaningfully faster than Shopee's GMV annual growth rate.'
Companies have implemented measures to manage credit risk and prevent defaults. Others, like Lazada and Tokopedia-TikTok Shop, partner with local licensed third-party lenders.
More crucially, several Southeast Asian countries have implemented BNPL-specific regulations or are in the process of doing so. Two of them, namely Indonesia and Singapore, have age-related requirements.
'Young people need to be paid special attention to,' Celios' Huda says, especially since amid the current economic conditions, the demand for pay-later and online loans will continue to grow.
Analyst Kapron echoes the concern. 'BNPL is fantastic for inclusion,' he says, 'but without nudges and sensible limits, it can turn into a habit that's hard to stop.' TECHINASIA