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       CONSUMER spending is an important economic indicator when it comes to gauging the health of an economy.

       Having strong consumer spending data points towards generally a growing economy.

       Many strong developed economies like the United States and Japan, put great emphasis on it because it is a forward indicator.

       Take US for example, consumer spending accounts for more than two thirds of the country’s economic activity.

       As for Japan, which traditionally have always been a “saving” nation, it saw their household financial assets hit a record high of US$ 17 trillion (RM72 trillion), of which half is in cash and deposits, as of December 2021.

       This contributed in part to years of stagnation due to declining consumer spending pattern.

       The decline has persisted for eight years now since its height in 2014. Japan’s government policy focus has always been to encourage consumer spending; hence, all sorts of policies were put in place to attain such a goal.

       This includes low interest rate (think zero interest for fixed deposits), direct handouts of spending vouchers, national shopping events and abolishment of sales tax among others.

       Yet, the simplest sign that it is hard to overcome the thrifty innate culture of the Japanese people was when direct cash handouts given to pandemic affected individuals did not boost consumer spending, but instead went to the savings of the people.

       This led to policymakers having to rely on increased digitisation to enhance consumer spending.

       Buy now, pay later

       Technology has always been the great enabler of mankind, improving the quality of life whether through delivering convenience, enhancing safety, protecting environment and others.

       So, adopting technology to spur consumption is a natural progression.

       Today, it is so easy to make a transaction, often requiring only one tap of the screen or a wave of the card. Immediately, the transaction is successful and our account gets debited.

       If only earning money was that easy for people. Interestingly, companies that enabled such seamless transactions are the ones seeking to profit immensely via increased consumption spending patterns.

       These service providers or platforms even rebranded the age old concept of “debt fuelled spending” to a trendy term “buy now, pay later” (BNPL).

       From the table, we can see the biggest names within the BNPL space, their respective valuation and financial numbers. None of them, are in fact profitable but the valuation given by the market is exorbitant. Although their lofty valuations have cooled somewhat in recent times following the continuous tech and growth stocks sell-off globally, it remains an integral part of the economy where they are the key enablers of consumer spending and additive consumption by the masses.

       One may ask, how can Afterpay, once listed in the Australia Stock Exchange, which is still bleeding to date to the tune of hundred of millions, was acquired by Block Inc (formerly known as Square Inc) for a colossal price tag of US$29bil (RM122.7bil) last year?

       Is this purely market irrationality or was Block Inc hoodwinked into the deal?

       Debt-fuelled consumption

       I was often told by industry players, especially in the startup scene that my long term fundamentalist nature is not suited for the venture capital scene. The advice dished out out of goodwill is to look at technology companies beyond the lens of rational valuation and to focus on its utility.

       So, they would say investing in a BNPL company and space essentially is buying into the long-term debt driven consumption spending pattern of people.

       While that may sound like a viable investment thesis, it is to me, what I deem everything wrong about capital markets. I interpret this understanding of owning or running a BNPL company, in other words, is buying into the fatal weakness of the masses who “live beyond their means” and claiming an early stake.

       The more people take on debt, the longer the repayment, the more profitable BNPL companies become. The success of BNPL companies are premise on others misfortune.

       Back home, we have a rather dominant e-wallet company that have caught the firestorm with their 36% interest per annum charges for its micro-lending service GoPinjam. Touch ‘n Go, have attracted many criticism of late by various parties including politicians and consumer NGOs. Some even wrote publicly to Bank Negara seeking the authorities to intervene at the onset to prevent legal “loansharking” activities.

       Following the public’s backlash, Bank Negara gave a statement which did not specifically mention Touch ‘n Go or its services.

       While the statement assures that the central bank will monitor and take action should the occasion arise, there was a line in their statement which was surprising.

       It says “The bank would like to clarify that it does not intervene in the pricing of retail financing products, which are commercial decisions of the financial service providers (FSP).”

       Respected institution

       Now, Bank Negara is one of the most respected institutions of our country, with the brightest minds and professionals tasked to safeguard the financial ecosystem of the nation.

       As much as I am pro-business and pragmatic when it comes to economic policies, it is my humble belief that commercial decisions for the sole purposes of a single FSP’s profitability, should never be allowed to trump over the the need to uphold financial welfare of the masses, especially the vulnerable B40 of society, the segment that GoPinjam would serve.

       Vicious cycle of debt

       To be frank, I am also the user of Touch ‘n Go’s e-wallet and enjoy the convenience which this platform provides in my daily transaction needs. I do not need to bring out excessive amount of cash or frequent the ATM just to get through the day.

       As a beneficiary of the company’s platform, I can see the need for them to find alternative revenue streams to sustain and grow the business as a whole.

       However, taking a shortcut to recoup cost and grow profitability via charging exorbitant interest rates (even higher than the 12%-18% allowed under Moneylenders Act 1951) is a tad unethical.

       This will simply exacerbate the vicious cycle of debt, especially in a time of post-pandemic, post-flood recovery economy, for the most badly affected.

       While Touch ‘n Go did clarify that they have their internal systems to control, as well as willingness to comply to the central bank’s responsible lending guidelines, there is no need to leave a wedge open for potential floodgates.

       Financial prudence is key to a happy life

       Some honest and hardworking people, despite a lifetime of hard work may not be able to make it into the T20 category, for reasons that may not be of their own doing.

       However, achieving high income status or accumulating great wealth have very little correlation to happiness in life. A rich man may not be happy, conversely a poor man may be a happy man. This can be due to different sets of expectations and level of contentment.

       So, what matters most in fact is being able to get out of the middle income trap or essentially being debt-free.

       Of all the life goals I hear from my fellow working friends, most hope to achieve financial freedom. The basis for that at its very core would be financial prudence.

       Let’s all work towards building a nation, not obsessed with boosting consumption spending at the expense of financial wellbeing. That is the least, dominant fintech players should aspire to achieve.

       Ng Zhu Hann is the CEO of Tradeview Capital. He is also a lawyer and the author of “Once Upon A Time In Bursa”. The views expressed here are the writer’s own.