South Africans are set to spend about R2bn through buy-now-pay-later (BNPL) services by end-2022, data from payments provider PayFlex shows.
During the Covid-19 pandemic, e-commerce more than doubled in size, but still makes up only a small portion of total retail sales. By some estimates, this number is below 5%. To help push up these numbers, flexible credit options, such as buy now pay later, have been touted as a catalyst in the growing field.
The model, which is offered by several online payments companies such as Payflex, PayJustNow and CheckiD, guarantees full payment to the merchant, while enabling customers to buy goods and pay small amounts upfront and the balances over time, usually weeks.
Payflex, which specialises in BNPL, said these types of payments are growing 10%-15% a month and recorded a 50% hike between the first and second quarters of 2022. With this momentum, Payflex says BNPL payments are likely to be about R2bn by end-2022.
Based on an estimated R1-trillion in total retail done in SA annually, according to World Wide Worx, that implies less than 1% of the pie. In relation to online retail where the BNPL is most used, estimated at a total of R30.2bn, that would account for 6.6%.
Payflex says it is SA’s largest BNPL provider with more than 300,000 customers
The model has been applied for about eight years in the UK and Australia, where it has more than 11-million users. Prosus, through its financial technology unit PayU, has invested in the business model, particularly in India.
More comfortable
Proponents say the service is a strong factor in helping to boost e-commerce adoption by hesitant consumers.
Payflex CEO Paul Behrmann says South Africans are becoming more comfortable with using BNPL as a budget tool, shunning expensive credit to pay for purchases in four equal instalments.
In June, technology giant Apple put its weight behind BNPL saying it was entering the market through its payments platform Apple Pay, specifically for online shoppers.
Craig Newborn, CEO of PayJustNow, says the move by Apple has brought attention and credibility to the industry, with players anticipating that this will be a driver for greater adoption in future.
Newborn’s company was bought out by HomeChoice International, a JSE-listed homeware and bedding direct marketing retailer and digital-only lending business, showing growing interest from SA corporates.
PayJustNow had just fewer than 30,000 customers when HomeChoice bought it in 2021. By June 2022, it had more than 300,000 — a greater than tenfold increase. The product, which is available to 1,541 merchants, is found in more than 3,650 individual stores or websites including Edgars, Puma, Cape Union Mart Group and Poetry.
Revenue of goods sold through the platform grew to R224m by June, from R58m in the previous period.
Similar product
There are more than 3,650 active online and in-store points of presence and 4.7-million customer referrals through the PayJustNow website.
TymeBank has a similar product available at some TFG-owned stores.
Earlier in the year, Behrmann told Business Day that consumers making use of BNPL tend to already have access to credit cards or other forms of unsecured funding.
In a country where debt is an issue that has plagued consumers for decades, with many South Africans living beyond their means, Behrmann says the structure of BNPL helps to promote more responsible spending by consumers.
While most BNPL has tended to be focused on online retail, PayJustNow has differentiated itself by also offering an in-store service, which Newborn says is gaining traction. With more than 90% of retail in SA still taking place at physical locations, he says offering an in-store service was too big an opportunity to pass up.
With Katharine Child
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