Economic challenges like debt and reckless spending in a cost-of-living crisis are all exacerbated by a severe lack of financial literacy. Recent research shows that the level of financial literacy in South Africa is quite low, with only 42% of the adult population being financially literate.

According to Chris Govender, chief operating officer of Rentoza, many South Africans don’t have the financial knowledge to manage their spending and begin accruing high levels of debt. A recent study by The Outlier’s entitled “Debt Trap” found that out of 27million South Africans with credit, 10-million are three months or more behind on payments or facing legal action and negative credit listings. Govender poses the question: Are we that bad at managing our money, or is the system in need of an overhaul.

“The average consumer is seeking out alternative ways of affording the lifestyle they are accustomed to, but they need to find stability through a more predictable and agile way of spending,” says Govender.

Subscription services are revolutionising the consumer finance landscape by offering pay-as-you-use models, as opposed to long-term credit-based obligations seen in traditional models. Govender emphasises, “Subscription represents a paradigm shift in how we approach consumer finance. By prioritising flexibility and affordability, they not only meet the needs of today’s consumers but also have the potential to democratise access to goods and services for all income levels.”

For Govender, subscription eliminates much of the hassle associated with traditional credit. As a non-credit model, he says, “The benefit to consumers is that there is another option for people to access products without having to borrow money to afford something that really can’t fit in the household budget.”

As one of South Africa’s fastest-growing e-commerce businesses, Rentoza developed a model to drive access at affordable rates and flexible terms to essential items, such as consumer electronics, appliances, and baby goods. By simply paying a subscription fee, these products can arrive at your door and into your life with insurance cover and maintenance costs built into the subscription.

“With changing preferences and increasing digitalisation, consumers seek flexibility and cost-effectiveness,” says Govender. “Rising living costs and the pandemic have accelerated the adoption of digital solutions and alternative purchasing options that allow us to adapt to our circumstances.”

Flexibility is a key advantage of subscription services for both consumers and businesses. Govender says consumers can make month-to-month decisions without long-term commitments or liabilities. This flexibility addresses the evolving needs and expectations of modern consumers who desire control over their expenses and lifestyle choices while avoiding credit debt traps.

Looking ahead, Govender says the relationship between subscription services and traditional credit is likely to remain distinct. “While subscription services offer flexibility and affordability, traditional credit may still have its place in certain financial transactions. However, consumers are catching onto the fact that credit doesn’t work for them in today’s world.”