From click to compliance: shariah-compliant buy now, pay later

The "Buy Now, Pay Later" (BNPL) service is an innovation in business transactions. It is a short-term financing facility for customers when purchasing goods or services. Recently, BNPL has been considered an alternative to credit cards with several key differences, such as in terms of the approval process, interest and fee charges, protections, rewards, flexibility, and acceptance by retailers (Smith, 2024). In Malaysia, BNPL is gaining popularity among customers, retailers, and online shopping platforms such as Shopee, Atome, and Grab (COOB, 2024). This is evidenced by the 52 million transactions in 2023, which were valued at RM4.3 billion. Furthermore, there are 2.9 million active BNPL users, with 47% primarily young and middle-aged adults ranging from 31-45 years old (COOB, 2024). According to the most recent census by the Malaysian government in 2020, 63.5% of the population in Malaysia practices Islam (DOSM, 2020). In addition, a study by Ramli et al. (2022) has also evidenced that Islamic ethics significantly influenced the intention of Malaysian Muslims to purchase. This emphasises the significance of religious and ethical considerations in the buying behaviours of Muslim customers. Hence, it is an opportunity for BNPL operators to fulfil Malaysia's Muslim community's demand for Shariah-compliant BNPL services. Therefore, BNPL services in online platforms require in-depth evaluation to ensure that they meet the demands of Muslim customers and comply with Shariah principles. According to Al-Mahbubah and Nurwakhidah (2021), BNPL service must be in line with the principle of Islamic finance, which strictly prohibits riba' (interest), gharar (uncertainty) and maisir (gambling). Concurrently, BNPL must be built on social justice, ethical conduct, and customer fairness. Therefore, ensuring compliance with these elements is crucial so all parties involved in the transactions are treated fairly, transparently, and equitably. Hence, this article examines the potential Shariah issues of BNPL services and discusses the possible BNPL framework in compliance with the Shariah principle.