South Africa Buy Now Pay Later Market Outlook to 2027F: Ken Research


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1. The Covid-19 pandemic is a driving force in exhilarating and paving the way for newer companies to enter the BNPL space in the country, in addition to external investments made in the industry

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In the last couple of years, South Africa has seen tremendous growth in the digital economy. Because a large portion of the South African population has access to traditional bank accounts, as well as internet and mobile banking adoption. Therefore, there is plenty of room for credit service industries like BNPL to carve out a strong presence in the country. One of the main reasons why BNPL is such a strong mechanism in South Africa is that customers can pay the money in three equal instalments with no interest. Although there is a carry forward fee in the event that the shopper misses the payment deadline, it is almost non-existent, making the industry quite profitable in a region with a lower per capita income.

2. South Africa’s Buy Now Pay Later industry has gained significant traction, growing at a CAGR of 64.6% between 2019 and 2022.

South Africa Buy Now Pay Later industry 1

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The Buy Now Pay Later industry in South Africa generated multi-million in revenue in 2022, growing at a CAGR of 64.6% between 2019 and 2022P. The South African BNPL market boomed during the COVID-19 pandemic because a large portion of the residents lost their jobs during this period and was surviving on their savings, which pushed for the need for additional credit lines, which BNPL services catered to. South Africa occupies a major chunk of fintech space in the African continent when compared to other African economies with respect to both financial services as well as insurance. Additionally, the high rate of mobile penetration in the South African market close to ~95% means a robust integration of BNPL technology in the fintech space in the country.

3. Consumers and investors are taking notice of the replacement of Layby through BNPL as well as the emergence of bank partnerships spurred by significant acquisitions like PayFlex by ZIP

South Africa's Buy Now Pay Later industry 2

The Lay-by business model dominated the market in South Africa until the BNPL mechanism took off. It was the customary manner to make payments on items over time. Customers would put a minimum of 20% down payment and pay for the item in no-interest payments over a maximum of three months. The seller unit will keep the item until the full payment is paid. The Buy-Now-Pay-Later circuit has taken its position in the modern day. Furthermore, partnerships between banks and fintech would allow the former to expand into new, creative credit choices while supplying money to the latter due to the rise in BNPL participants. Banks, on the other hand, can offer exclusive products by creating their own platforms and funding these payment infrastructures. Additionally, banks can add BNPL services to their credit card offerings.

4. Rising indebtedness, combined with high costs to merchants caused by a lack of consumer awareness, is posing a significant challenge to the expansion of the BNPL market in South Africa.

South Africa's Buy Now Pay Later industry 3

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Regulators are concerned about rising indebtedness and consumer risk as the BNPL market expands rapidly. With the use of BNPL services, unwise purchases are becoming more common as unsecured credit risk is assessed using these methods. BNPL providers, on the other hand, can help mitigate these risks by improving their monitoring and understanding of customers’ financial and transaction history and behaviour in order to provide a more accurate and secure credit risk assessment. In addition to these, as digital payments are still relatively new in the African market, rural consumer segments are often unaware of the latest trends in the BNPL industry. This, combined with the digital divide in the urban-rural setting, poses a significant challenge for merchants and BNPL players in South Africa