In many ways, the retail credit market acts as a barometer of broader economic health, reflecting consumer confidence, spending power, and financial stability, writes Regan Adams, CEO of RCS.
2024 saw South African consumers grapple with harsh economic challenges such as high inflation and interest rates.
Data from credit bureaus like TransUnion and Experian have highlighted these struggles, reporting a rise in the number of customers in arrears, while debt review applications have surged. Even home loan delinquencies – typically a last resort for struggling borrowers – have increased, indicating the severe level of financial stress in the market.
Amid this strained economic landscape, credit growth for retailers remained muted. Despite a high demand for credit, approval rates declined as providers sought to limit their risk. This opened opportunities for short-term debt providers, which offer higher-margin loans over shorter repayment periods.
Buy Now, Pay Later (BNPL) services are being favoured by younger consumers for its simplicity and transparency, while older generations have gravitated towards lay-bys for similar reasons. We’ve also seen a growing adoption of alternative payment methods, such as consumers purchasing vouchers and using them as a form of payment to buy products or services.
On a more optimistic note, the digital revolution has continued to reshape credit markets, with digital wallets, embedded payment platforms, and super apps gaining significant traction. RCS has been at the forefront of this transformation, strengthening its position through partnerships with industry-leading brands such as Baby City, Bash, Dis-Chem, Computicket, Leroy Merlin, NetFlorist and Toys R Us. These partnerships, alongside seamless integrations with payment platforms like Payfast and Peach Payments, have solidified RCS’ position as a leader in delivering accessible and flexible payment solutions.
Balancing credit growth with responsible lending
A key challenge this year has been balancing the pursuit of credit growth with the responsibility of preventing over-indebtedness. For RCS, responsible lending remains a cornerstone of our approach, ensuring that consumers have not overextended themselves. Through advanced affordability assessments, machine learning tools, and educational initiatives, we strive to empower consumers to make informed borrowing decisions and manage their repayments responsibly.
Financial literacy sits at the heart of this mission. In collaboration with Welltec, RCS offers tools and resources that promote responsible credit use. Notably, we introduced welcome calls for new customers to explain repayment terms, payment methods, and credit management basics. This proactive approach aims to build financial wellness from the outset, helping customers navigate their credit journey.
Looking ahead to a brighter 2025
The South African Reserve Bank’s recent interest rate cuts, combined with inflation returning to target levels, signal a more supportive environment for consumers and businesses alike. Retailers have already begun to relax credit restrictions, with companies starting to increase their credit appetite. At RCS, we see this as an opportunity to expand our reach responsibly, which includes extending credit to “thin file” customers – those without a credit history – using advanced machine learning indicators.
Going forward, digital transformation will continue to drive innovation in the credit market. E-commerce is expected to grow further, with online payment gateways increasingly integrated into physical stores. The use of artificial intelligence, which is already integral to decision-making processes at RCS, will start maturing with its ethical and reputational use being addressed.
Despite the positive outlook, 2025 will not be without its challenges. The credit market remains highly competitive, which means brands need to differentiate their products and services. Providers must adapt to changing consumer expectations, offering personalised experiences through data-driven insights.
Financial education will also remain critical. With debt levels still high, empowering consumers with the knowledge to manage their credit effectively is both a social responsibility and a strategic necessity. Although economic conditions are improving, the lingering effects of financial strain call for resilience – both from consumers and for credit providers.
A promising path forward
As we close the chapter on 2024, the retail credit landscape in South Africa is facing a resurgence – one that will be defined by adaptability, innovation, and responsibility. At RCS, we are committed to leveraging technology, enhancing financial literacy and delivering solutions that meet the evolving needs of South African consumers.
The year ahead promises growth and transformation, but it also calls for a shared commitment to sustainable and inclusive practices. By working together, we can cultivate a retail credit environment that promotes financial wellness and accessibility, while contributing to broader economic recovery.