Buy now, pay later models to turbo-charge SA’s online shopping
The buy now, pay later (BNPL) payment model is expected to turbo-charge SA’s e-commerce sector, as more online retailers offer consumers flexible split-payment options, amid tough economic times.
Speaking this week at the E-commerce Virtual Summit spearheaded by PayFast and Insaka eCommerce Academy, Jonathan Smit, MD and founder of online payment gateway PayFast, discussed SA’s online shopping trends, as the COVID-19 crisis continues to drive more traffic to e-commerce sites.
South African-based PayFast accepts online payments from local and international buyers across more than 80 000 merchants, which run their business through the fintech firm’s payment gateway.
He pointed out that while the last 12 months have been challenging for most sectors, fortunately the e-commerce sector across the globe has been at the right side of the COVID-19 pandemic, proving to be an “absolute adrenaline shot in the arm” as the fintech firm saw an unprecedented doubling of sales between April and May 2020.
Smit noted that flexible payment options, such as the BNPL payment models which are 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.
“Buy now, pay later payment models like Afterpay, which pioneered in Australia – we’ve seen the trend reach the rest of the world and starting to become more prevalent in SA as well. The UK estimates that 10% of all e-commerce payments will be done by flexible payment methods by 2024, so that’s an interesting insight.”
The BNPL model is premised on payment platforms partnering with merchants to offer consumers deferred payment options for online purchases. Brands have reported significant gains through consumers making larger purchase volumes and fewer abandoned shopping carts when they are offered the option to spread the payment of large purchases out over several weeks or months.
Alternative payments awareness
Smit emphasised the importance of retailers adopting mobile-first strategies and seamless integration of mobile-based payment options, noting PayFast witnessed a 143% increase in payments facilitated via phone as opposed to desktop payments, which grew by 54% year-on-year.
“E-commerce players have to ensure they offer a seamless shopping experience for smartphones and other mobile devices, and there is going to be a lot more that happens in the mobile space in future, whether it’s via Apple Pay, Samsung Pay, Huawei Pay or others.”
In an interview with ITWeb, Paul Behrmann, CEO and founder of payment platform Payflex, explained the BNPL trend is expected to see significant growth in SA this year, influenced by more merchants adopting BNPL checkout methods and more consumers becoming aware of the alternative payment option.
“Once consumers realise the benefits and convenience of a BNPL offering, they are more likely to shop more frequently and use the merchants which provide this offering. Research suggests consumers are far more likely to complete a purchase when a BNPL product is available. This, coupled with the fact that it is a non-interest-bearing product, makes it a no-brainer for consumers,” notes Behrmann.
When consumers pay over a set period of time, while spending within their budget, without being penalised by interest on the credit payment model, this results in local shopping sites increasing their revenues, he adds.
“This increases the merchant’s revenue because the shopper can buy more – online retailers in-turn are seeing these revenue benefits, resulting in brands such as USN, Superbalist and BidorBuy joining the over 700 merchants on the Payflex platform, which offers these flexible payment options.”