South Africa's rapidly-expanding buy-now-pay-later (BNPL) sector is pushing back against concerns raised by the South African Reserve Bank (SARB), arguing that responsible lending practices and affordability assessments distinguish BNPL from traditional forms of credit.
This comes after the SARB recently warned in its Financial Stability Review that the growing popularity of BNPL products could contribute to household financial stress by encouraging consumers to take on multiple repayment obligations simultaneously.
The central bank said the perceived affordability of BNPL arrangements, combined with the ability to hold concurrent BNPL agreements, increases the risk of over-indebtedness and could weaken households' overall financial position.
It also expressed concern that “many BNPL products operate outside the scope of the National Credit Act, despite sharing many characteristics with conventional credit, because providers generally do not charge interest or upfront fees”.
Major local BNPL providers Payflex, Happy Pay and PayJustNow tell ITWeb they acknowledge the need for appropriate oversight, but reject suggestions that BNPL is driving widespread financial vulnerability for consumers.
Tracey-Lee Zurcher, CMO at Payflex, says responsible BNPL products should not be viewed in the same way as long-term debt.
"We understand why this is an important conversation, and we welcome ongoing engagement with regulators as the sector continues to evolve. At Payflex, we see BNPL as a budgeting tool rather than a form of long-term debt.
“Customers know upfront exactly what they'll repay, there are no interest charges on scheduled payments, and repayment dates are clear before they complete a purchase. We also have robust affordability and risk controls in place,” she notes.
According to Zurcher, customers don't have unlimited access to credit, and Payflex actively manages spending limits based on repayment behaviour and other risk indicators.
“Responsible lending has always been central to how we operate. It is important to note that not all BNPL providers are the same. Payflex is conservative with the intention to improve credit scores and enable access to credit," she explains.
Happy Pay argues that BNPL products should be differentiated from revolving credit facilities that accrue interest over extended periods.
Wesley Billett, CEO of Happy Pay, says available evidence does not support claims that BNPL is a significant driver of over-indebtedness and maintains its business model encourages responsible lending because profitability depends on successful customer repayments rather than interest income.
"We believe it is important to distinguish responsible BNPL products from broader concerns around consumer indebtedness. Firstly, BNPL is fundamentally different from revolving credit. Customers are not carrying balances indefinitely, interest is not compounding, and repayment schedules are fixed and known upfront. The product is designed to help consumers manage cash flow rather than accumulate debt,” explains Billett.
Secondly, the available evidence does not currently support the view that BNPL is driving widespread over-indebtedness, he adds.
According to Billett, recent research published by TransUnion found that BNPL risk performance in SA is lower than, or comparable to traditional credit products, while also expanding access to consumers who are underserved by mainstream lenders.
The same research found that 17% of BNPL users were new-to-credit, demonstrating that the product is helping bring consumers into the formal financial system rather than simply increasing indebtedness.
"Happy Pay was among the first BNPL providers in South Africa to begin reporting repayment behaviour to credit bureaus because we believe strong reporting standards, affordability assessments and responsible lending practices strengthen the sector and improve consumer outcomes."
PayJustNow says it shares the SARB's objective of protecting consumers but believes industry performance data paints a different picture from that of SARB.
Mark McChlery, co-founder of PayJustNow and VP of data at Weaver Fintech, says: "Our data instead demonstrates that BNPL is helping manage cash flow more responsibly.
“BNPL is a payment product, not a revolving credit line: it is designed for cash-flow management and financial inclusion, not to replace credit or loans. Ninety-eight percent of our users repay on time and our default rate sits below 2% of GMV, even under cost-of-living pressure.”
McChlery points out PayJustNow is engaging regulators proactively, through SACRRA, the National Credit Regulator working group and fintech association FINASA, to support proportionate regulation, including credit bureau reporting, that preserves the inclusion benefits while strengthening safeguards.
“We use a low-and-grow strategy, where customers start with smaller facilities that increase only with responsible repayment behaviour. Every application includes a bureau credit score check and our own affordability assessment. The requirement to pay the first instalment upfront serves as the strongest real-time affordability signal,” McChlery comments.
The SARB, in an e-mail sent to ITWeb, further states: “The absence of comprehensive data on the BNPL sector makes it difficult to assess its systemic impact. The SARB is working with the National Credit Regulator to improve data collection and evaluate whether regulatory changes may be necessary for the industry.”
Monitoring the BNPL sector is challenging primarily because many providers operate outside the scope of the National Credit Act and there is currently no comprehensive, centralised reporting of BNPL transactions.
Profiting from default payments
BNPL allows consumers to purchase goods or services online immediately and pay for them in fixed instalments over a short period, typically without interest if repayments are made on time.
Unlike traditional credit products, BNPL providers generally earn revenue from merchant fees rather than interest charged to consumers, although late payment fees may apply.
Providers primarily generate their profits by charging merchants a transaction fee for offering the payment option at checkout, while others may also earn funds from penalties instituted when late payments occur.
The SARB’s warnings come as BNPL adoption continues to accelerate in SA, fuelled by rising living costs, growing e-commerce activity and consumers seeking alternatives to traditional credit products.
TransUnion's Q4 2025 South Africa Industry Insights Report found that 57% of South African consumers now hold a buy-now-pay-later product, while 36% have used one multiple times during the past 12 months.
PayJustNow says its customer base has expanded rapidly since launching in 2019, with the platform now serving more than four million registered consumers and processing over nine million transactions worth more than R13 billion.
According to Payflex, demand has grown exponentially since its launch in 2019, as consumers increasingly seek flexible ways to manage monthly budgets.
Merchant-funded business model
Another pointof consensus among the three providers is that their businesses are not built around consumer debt or penalty fees.
Instead, all three say they generate the bulk of their revenue from merchant transaction fees, arguing this aligns their commercial interests with successful customer repayments rather than benefitting from missed payments.
Zurcher points out: “While Payflex does charge a default fee if payments are missed, it is not a revenue-driver. Default fees are used more to encourage prompt repayment. Payflex creates an ecosystem that connects retailers and consumers. Instead of the customer having to pay for the service, the cost is pushed to the merchant, who bears a slightly increased fee per transaction.”
Billett notes: “Our business model is merchant-funded. The vast majority of our revenue comes from transaction fees paid by merchants when a sale is completed, as well as advertising revenue generated through our performance ads platform. We do not rely on customer interest or late fee charges to generate returns.
"This is an important distinction because our incentives are aligned with helping consumers transact responsibly and helping merchants grow sales, rather than generating revenue from customer debt or financial distress."
PayJustNow says it continues to maintain a consistent default rate of below 2% of GMV since inception.
McChlery explains: “Our model is not built on penalty income. The significant majority of our revenue comes from merchant fees we charge for offering BNPL at checkout, not from consumers. Penalty fees are a very small share of revenue, and we have no commercial incentive to grow them."
The three companies also stressed that they support greater regulatory clarity and transparency, particularly around affordability assessments, credit bureau reporting and consumer protection standards.
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