Beyond credit cards: The growing appeal of BNPL in South Africa

In the realm of retail finance, a notable transformation is underway in South Africa, one that is reshaping how consumers approach credit services. Much like its global counterparts, the Buy Now Pay Later (BNPL) market in South Africa is experiencing unprecedented growth. With the local BNPL market estimated to have reached US$900 million at the end of 2023 and projected to soar to US$1.6 billion by 2028 according to KenResearch, it's clear that BNPL is more than just a passing trend — it's a fundamental shift in consumer behaviour.

The demographics that are fuelling this exponential rise of BNPL in the country are primarily Gen Z and millennials, who make up over 50% of South Africa’s population. PayJustNow, one of South Africa’s leading BNPL providers, reports that 71.6% of its registered customers are under 40, confirming this trend. Younger generations increasingly prefer BNPL due to its convenience, flexibility and transparency about fees compared to traditional lending mechanisms like credit cards. They are also actively seeking low-interest or interest-free credit lines like BNPL, driving its popularity in the region.

Despite the burgeoning growth, the BNPL market in South Africa remains largely dominated by a select few players, predominantly fintech firms and payment service providers such as PayFlex, PayJustNow, and HappyPay. However, amidst this dominance, there lies a vast untapped opportunity for other industry players to carve out their niche within the BNPL ecosystem. Banks, in particular, possess the resources and infrastructure to catalyse significant disruption by launching their own BNPL offerings. By doing so, banks can not only diversify their service portfolios but also provide existing customers with a more attractive alternative to traditional credit services, helping them both retain and attract customers.

For banks looking to navigate this space, the benefits are numerous. Embracing BNPL enables them to compete with the compelling offerings of fintechs and BNPL specialists and secure their share in this lucrative market. By leveraging their existing customer base and brand reputation, banks can position themselves as formidable contenders in the BNPL arena.

The rise of BNPL in South Africa signifies more than just a shift in payment methods - it represents a paradigm shift in how consumers perceive and access financial services, especially millennials and Gen Z. By recognising the potential of BNPL and seizing the opportunity to innovate, banks and other financial institutions can not only meet the evolving needs of their customers but also solidify their position as leaders in the dynamic landscape of retail finance.