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Buy-now-pay-later to be star of Black Friday bonanza

Read time 4min 50sec

A record number of South African online shoppers are expected to take up credit facilities, as they give in to the temptation to spend money they do not have, to join today’s Black Friday extravaganza.

More South Africans are expected to take to online shopping channels this Black Friday/Cyber Monday period than previous years. E-tailers say more bargain-hunters will use credit options, such as buy-now-pay-later (BNPL)short-term financing and credit cards – despite many struggling with increasing debt burdens.

Flexible payment options, such as BNPL, are expected to turbo-charge the local e-commerce sector, as more online retailers offer consumers flexible split-payment options, amid tough economic times.

BNPL models, currently revolutionising the global e-commerce sector, are gaining traction in SA, as more locals opt to break up their payments in interest-free monthly or bi-weekly instalments.

Online brands are placing their bets on making significant gains through consumers who opt for BNPL, premised on payment platforms partnering with merchants to offer consumers deferred interest-free payment options for online purchases.

“BNPL has become exceedingly popular over the last two years in SA, but based on global adoption, has plenty of room for growth. We expect to see record use of interest-free BNPL options this Black Friday,” says Alex Forsyth-Thompson, CEO and founder of local fintech start-up Float.

“The unfortunate truth is that SA consumers are overly dependent on credit, and reckless lending has only served to compound this problem. We believe the adoption of BNPL will go a long way to reversing this trend.”

According to Forsyth-Thompson, BNPL comes with several advantages, as unlike traditional loans, BNPL provides a fixed fee from the merchant, as opposed to monthly fees and compound interest. Consumers are also able to shop at multiple online stores, opt to pay only a portion of the price upfront and the rest is paid over several months – on zero interest for customers paying back on time.

Jarred Deacon, head of growth at payments platform Payflex, told ITWeb the number of users who have signed up for BNPL this month, even before Black Friday, indicates an increase of hundreds of percentage points, compared to the same period last year.

Jarred Deacon, head of growth at Payflex.
Jarred Deacon, head of growth at Payflex.

“We expect an increase in the number of customers buying online via BNPL this year, as there is greater awareness of the BNPL concept, which also ties in with what we are seeing on the ground. Consumers are adopting BNPL as an alternative to expensive credit. On the merchant side, online merchants see increased sales and larger basket sizes when BNPL is offered to their customers.”

According to Deacon, Payflex’s online merchant partners indicate BNPL is attracting almost eight times more customers than traditional credit payment options.

“Ultimately, consumers respond to good deals and want instant gratification, and more are now aware of the interest-free payment options.”

Credit caution

Online shopping adoption has soared in SA on the back of COVID-19 lockdowns,growing by 66% from 2018, bringing the total online retail revenue to R30.2 billion, according to a study conducted by World Wide Worx.

While consumer sentiment and spending patterns continue to reflect the economic downturn due to the COVID-19 crisis, retailers expect spending patterns to shift to more essential items.

Spending on furniture, home improvement, sports/gym equipment and tech products is expected to gain momentum during this year’s Black Friday period, as people spend more time in their homes.

According to TransUnion data released this week, consumers who open new credit facilities during the Black Friday period every year end up spending more than consumers with existing accounts – up to R10 000 more, mainly spent via credit cards.

“Despite overall levels of consumer debt remaining high, we’re still anticipating a higher consumption of credit on new facilities, compared to existing facilities during the Black Friday period across several credit types,” says Lee Naik, CEO of TransUnion Africa.

“More than ever, South African consumers must be sure they can repay any credit they incur, and lenders need to make informed and responsible lending decisions in granting credit.”

Stef Michael, marketing executive at JD Group, which owns online store Everyshop, Incredible Connection and HiFi Corp, believes cash-strapped consumers will be the biggest hunters and gainers.

“With the festive season being a priority, it is expected that an increased amount of consumers will seek payment solutions that provide more flexibility. Consumers are looking for means to access discounted deals and plan their spend over a period. With this, some promotions may only be valid for a limited period, and consumers seek payment solutions that allow them to secure products.”

Michael points out that consumer needs remain diverse and unique, citing Everyshop as an example: “Consumers will take advantage of great deals on appliances, tech-related goods and furniture – but we also see a massive interest in houseware, fashion, beauty and other categories.”

David Cohen, co-CEO of Superbalist.com, says: "We've seen a significant increase in the number of customers using the BNPL options over the past year. Consumers are also looking for flexibility and convenience, and BNPL providers help consumers shop for the latest fashion without the added interest."

Categories expected to see the highest sales onSuperbalist.com include loungewear, sleepwear and homeware, he adds.

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