Home-grown fintech start-up Float has launched what it believes to be South Africa’s first interest-free buy now, pay later (BNPL) product that uses a customer’s existing credit.
The product enables consumers to get their purchases upfront, and use existing credit to pay in up to 24 interest-free, fee-free equal monthly instalments. There are no applications and no credit checks, as Float uses credit already granted to the consumer by their financial institution.
“It is like using the budget facility on your credit card, but interest-free,” said founder and CEO Alex Forsyth-Thompson, a chartered financial analyst and certified financial planner who left the corporate world to develop the platform.
Founded in 2020, Forsyth-Thompson says Float helps consumers to be “financially responsible” while merchants see improved sales conversion rates and an increase of 30% in the size of average order values.
“BNPL has flipped consumer credit on its head as consumers don’t pay exorbitant interest or fees. However, while most BNPL players are still putting new debt into the system, Float is a cash flow technology, enabling customers to stretch their existing credit further without taking on new debt. They also still get their loyalty points from their credit provider with each purchase,” Forsyth-Thompson says.
The model charges the merchant commission on each transaction and, unlike other BNPL offerings, each merchant can configure Float to suit their business’s requirements. “Because of our unique model, we are able to process purchases 10 times the size of other BNPL offerings, with more flexible instalment periods, and without any application process or credit check.”
Forsyth-Thompson says that while BNPL is seen as one of the hottest trends in fintech today, credit card instalment products like Float have been a way of life in places such as Brazil, Mexico, Argentina, Turkey, and Israel for many years. According to the Brazilian Association of Credit Card and Services Companies, 62% of consumers who use credit cards purchase in interest-free instalments every month.
“With BNPL expected to reach more than R4,5-billion in South Africa by the end of 2021, we’re likely to see significant adoption of credit card-based instalments in our own market.”
Several prominent businesses have already signed up since Float went live in September, including Dial-a-Bed, Sloom, Arthur Kaplan, Jack Friedman, NWJ and Wits DigitalCampus, enabling their customers to use Float for Black Friday and festive season purchases.
Forsyth-Thompson says Float is ideal for big ticket purchases – be it furniture, home improvement, jewellery, luxury fashion, sports equipment or education.
“Solutions like Float are institutionalised and embraced in Latin America by travel, retail and the service industries alike,” says Janlo Van den Heever, head of e-commerce at Dial-a-Bed. “Effective cash flow management is a foundational principle of good budgeting, and Float enables you to make the necessary investments without extra admin or interest, today instead of tomorrow.”
When a customer is paying, they simply select Float as a payment method at checkout, choose the number of instalments and enter their Visa or Mastercard credit card details from whatever financial institution they bank with. “We check what credit is available on their card and convert it into an interest-free repayment plan instantly, which the shopper repays via Float,” Forsyth-Thompson says.
If a shopper pays late or not at all, Float simply deducts the balance of the instalment plan from their card – much like a regular credit card transaction – after giving a week’s grace period. “We don’t penalise our customers with late fees, which can be far more punitive than traditional interest and fees.”
Forsyth-Thompson says South Africa is an already indebted country; with 32% of credit card holders behind on repayments the problem is the ability to manage credit effectively.
“We believe that credit cards are one of the best cash flow tools available to consumers. Our goal is to drive positive financial behaviour by enabling efficient management of the facilities available to credit card users. In doing so, merchants that offer Float are able to drive incremental sales, and process larger purchases, in a way which was not previously possible.”
Float is backed by several private South African investors and strategic partners.