Three waves of COVID-19 over the past 18 months, and a fourth one looming, have all but devastated the South African economy. The unemployment rate is at a record high of 34.4%, according to Stats SA, and a TransUnion study shows that 62% of consumers are impacted financially as a result of the pandemic – 87% of whom are concerned about paying their bills. Add to this the dramatic rise in ecommerce driven by the pandemic, and the time is ripe for alternative payment solutions that offer flexibility, convenience and transparency.
Enter the buy now, pay later (BNPL) movement. This method of deferred payment allows buyers to increase their cash flow and budget more easily by splitting payments into four or six installments – interest free. This differs from the lay-by method in that the buyer can receive their purchases after paying the first installment rather than wait until all their payments are made.
This method is fast gaining popularity in South Africa. Local online merchants who provide a BNPL payment method are currently experiencing higher than average order values, larger purchases and significant growth in their revenue. In fact, a recent survey revealed that almost 80% of shoppers would not have made their most recent online purchase if not for the BNPL service, and a case study on British online fitness brand Gymshark showed that its average order values increased by 33% due to the addition of a BNPL option.
With this level of consumer interest, BNPL is expected to drive the growth of ecommerce further as more retailers get on board with split payment offerings. BNPL is predicted to grow by 66.9% annually in South Africa, from US$176.2 million in 2020 to US$ 1,673.7 million by 2028, says the Q2 2021 BNPL Survey. Globally, a study by PYMNTS.com shows that 48% of BNPL users will not buy from a merchant if they don’t offer BNPL.
BNPL has undoubtedly become an important service for both consumers and retailers in our new post-pandemic world, and the growing number of merchants partnering with BNPL service providers, along with rapidly evolving technology, are revolutionising the payments landscape. Which is good news for today’s consumers, who are increasingly searching for instant gratification, convenience and flexibility when shopping.