Once seen as a niche payment method, BNPL is now a significant player in the credit market, offering a pathway to financial inclusion for many under-served consumers.
According to the TransUnion Consumer Pulse Study for the fourth quarter, BNPL is not a new concept in South Africa. The study revealed that 74% of surveyed consumers in the country are familiar with BNPL, with 50% having used the service more than once in the past 12 months. Furthermore, 13% of respondents indicated that they utilised BNPL services to avoid paying credit card interest, while 12% leveraged the service to spread payments over time.
TransUnion Africa's Mladen Čolić highlighted that BNPL has been steadily growing on the continent for over a decade.
“BNPL has really gained popularity over the last 10 years, largely due to Africa being a mobile-first, digitally led continent. With increasing internet penetration and smartphone adoption, digital financial solutions have flourished,” he said.
Čolić further noted that BNPL transactions have grown at an average annual rate of 25% over the past five years. Consumers are increasingly seeking alternative ways to purchase goods, whether for personal use or business. He pointed out that many small business owners use BNPL to acquire essential tools and equipment, such as high-pressure hoses, which would otherwise be unaffordable through a single payment.
Despite its benefits, BNPL has faced scrutiny over concerns of over-indebtedness and a lack of credit reporting. However, Čolić believes that industry leaders are actively working to mitigate these risks by incorporating alternative data sources for risk assessment and ensuring that BNPL transactions are factored into broader credit evaluations.
“We are seeing ethical BNPL providers leveraging alternative data from credit bureaus like TransUnion to assess consumer creditworthiness,” he explained.
“For instance, if a consumer has previously taken out a personal loan and repaid it responsibly, this history can be used to determine their eligibility for BNPL services. In cases where there is no prior credit history, we are developing insights to help lenders make informed decisions.”
The COVID-19 pandemic significantly accelerated the growth of online shopping, further boosting BNPL adoption. Čolić noted that even e-commerce platforms are now integrating BNPL options to attract consumers and increase transaction volumes.
“E-commerce platforms are now offering multiple BNPL solutions as part of their alternative payment gateways,” he said. “If one platform provides 10 BNPL options while another does not, the platform with more flexible payment choices will naturally attract a larger share of consumers.”
--ChannelAfrica--
