January – or “JanuWorry” as it is colloquially known – is stressful for many South Africans faced with the consequences of festive season holiday splurges and back-to-school costs.
South Africans, who are amongst the world’s worst savers, face additional financial pressure as unemployment rates soar, the cost of living continues to rise and Covid’s impact on the economy takes its toll.
Experian consumer default reports show that there are significant increases in delinquency rates for personal loans and credit cards, so many consumers reluctant to take on additional debt have opted for flexible alternative payment solutions such as buy now pay later (BNPL). This payment approach allows consumers to stagger payments over a fixed period without incurring interest.
Paul Behrmann, CEO of South African buy now pay later (BNPL) provider Payflex, says that the number of customers using the service has more than tripled compared to last year.
“Customers can plan their purchases to stretch their payments over two salary cycles without entering into expensive credit agreements, which is especially useful in January. The dramatic increase in Payflex’s customers reflects South Africans’ preference for interest-free payment solutions like BNPL,” he says.
In addition to more customers using BNPL for festive season shopping, Payflex also saw more than a threefold increase in order values, number of orders and number of merchants.
Globally, BNPL has been taken up by consumers who have learned to shop differently during the pandemic and want to avoid taking on further debt. While BNPL’s global market share was 2,1% in 2020, it is expected to grow to 4,2% by 2024.
Payflex was recently acquired by global BNPL provider Zip, which has millions of customers and tens of thousands of merchants in 13 countries. “Interestingly, customer default rates in South Africa are the lowest in Zip globally,” says Behrmann.
“Risk-averse consumers are looking for budget-friendly payment options, so while the credit card will continue to be a significant payment method, the alternative payments landscape has emerged as a major contender in the digital payments arena,” he adds.