Buy now, pay later (BNPL) is emerging as a key player in modern consumer financing, offering an alternative to traditional credit models and reshaping how people access and manage credit.
Once dismissed as a niche payment option, BNPL has now become a significant force in the credit market, challenging traditional lending models and offering a pathway to financial inclusion for many underserved consumers.
BNPL is not a new concept. According to the TransUnion Consumer Pulse Study Q4 2024 74% of those surveyed in South Africa have heard of BNPL, with 50% of respondents using the service more than once in last 12 months. The study also indicated that 13% of those surveyed used BNPL services to avoid paying credit card interest, while 12% leveraged the service to spread payments over time.
Retailers have long offered instalment plans for high-ticket items, but the digital revolution and rise of e-commerce have supercharged its adoption. The appeal lies in its simplicity: consumers can split their payments into manageable instalments, often interest-free.
“The growth of BNPL has been fuelled by the increasing demand for flexible, accessible credit,” explains Mladen Čólić, sales vice-president: fintech at TransUnion Africa. “Younger consumers, particularly Millennials and Gen Z, are leading this shift, favouring the seamless, frictionless experience BNPL provides over traditional credit options.”
Bridging the Financial Inclusion Gap
One of BNPL’s most compelling advantages is its potential to bridge the financial inclusion gap. Traditional credit products often exclude consumers with thin credit files or those without formal banking relationships. BNPL, on the other hand, offers an entry point for these individuals to access financing without the barriers imposed by legacy credit models.
“We have seen BNPL serve as a powerful tool to empower financially underserved communities,” says Wesley Billett, co-founder and CEO of HappyPay. “By using alternative data and affordability-based lending, we can responsibly extend financial access to those previously excluded, ensuring they receive funding without falling into unmanageable debt cycles. BNPL presents a viable alternative, one that promotes responsible borrowing and financial stability.”
Data at the Forefront
Despite its benefits, BNPL has faced scrutiny over concerns of over-indebtedness and lack of credit reporting. However, industry leaders are actively working to address these challenges by leveraging alternative data for risk assessment and ensuring BNPL transactions are factored into broader credit evaluations.
“Incorporating BNPL data into credit scoring models could provide lenders with a more comprehensive view of a consumer’s financial behaviour, enabling them to make more informed credit decisions,” Čólić notes.
Billett emphasises the importance of affordability-based lending. “Ensuring that individuals only access credit they can afford, with clear repayment structures and no hidden fees, not only protects consumers but also enhances their long-term financial health.”
The BNPL Boom
The BNPL landscape is evolving beyond consumer convenience, it is actively reshaping the lending ecosystem. Unlike some traditional credit products that may include high-interest rates and fees, ethical BNPL providers are driving a shift towards transparent, consumer-friendly lending practices.
The Future of BNPL in Africa
BNPL is more than just a payment option; it is becoming a cornerstone of financial empowerment. “The next step for BNPL is integration into broader financial frameworks,” states Čólić. “By incorporating BNPL into credit reporting systems and regulatory structures, it can serve as a responsible and sustainable credit solution.”
Billett adds that BNPL’s potential goes beyond consumer finance. “We’re seeing female small business owners, students, and emerging professionals use BNPL to invest in productivity-enhancing tools like laptops, cameras, and even card terminals for their small businesses. This kind of spending drives economic participation and growth, making BNPL an enabler of upward mobility.”