How do you protect your disposable income from rising inflation and interest rates, but still get those important purchases made without breaking the bank?
For growing numbers of South Africans, the answer lies in Buy Now, Pay Later (BNPL), which is emerging as a cashflow-friendly budgeting tool that helps them get the most out of their money while avoiding falling even further into debt.
BNPL lets shoppers spread the cost of their purchases across three months interest and fee free, while receiving the goods immediately. This payment method is booming, with PayJustNow more than tripling its customer numbers in 2022, and CEO Craig Newborn expects this growth trend to continue through 2023. The company signed up 41 443 new customers in March alone.
BNPL is not only used by lower income consumers, says Newborn. The average PayJustNow customer is a salaried woman, who earns close to R17 000 per month. These financially secure consumers use BNPL as a tool for improving their buying power, with many seeing it as a payment option that gives them choice and makes them more likely to shop in stores offering it. Nearly 60% of purchases are made by repeat customers, who are continuously looking for ways to stretch their income.
“We’re seeing many ordinary South Africans struggling right now. They’re cutting back on their discretionary spending to make sure they have enough money for the essentials. As a result, we’re seeing a clear shift in spending behaviour, with more people than ever looking to stretch their rands, and take advantage of promotions and discounts,” said Newborn.
Most BNPL activity takes place between the 24th of the month until the 4th of the next month. There is also a spike around the middle of the month, when government employees are paid. In February, the last five days of the month accounted for 51% of the entire month’s sales. This shows users are being smart about using BNPL, because they use it as soon as they get paid their salaries to align with their budgeting, not as a last resort when they have a certain amount of money left, said Newborn.
PayJustNow’s recently launched Deals Page, which allows customers to get the best value from their purchases, saw more than 3 million people browse the page in March alone as they looked for ways to stretch their rands.
Consumers are also using BNPL to ease the financial impact of annual health checks and optometry. There is also a clear trend of customers buying better quality items that last longer, rather than cheaper items that need to be repurchased every few months, with so-called high-quality retailers making the most sales on the platform.
The beauty of BNPL is that it was designed to avoid contributing to rising consumer debt, said Newborn. “Shoppers use BNPL for a range of reasons. They want to be responsible with their finances, they like the convenience, or they simply don’t have a credit card. The model actually rewards good financial behaviour, because users must pay off one product before they can purchase another – and with each purchase, they build a better credit profile without the use of revolving credit.”
