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Integrating a BNPL solution into a retailer’s existing payment stack should therefore be seen as a non-negotiable next step in the business’ digital transformation strategy. It is a straightforward process that minimises additional administrative burdens and ultimately levels the playing field for businesses to compete at a larger scale — particularly as these tools allow for enhanced data on customer purchasing trends and key e-commerce metrics like cart abandonment.

Research from Kaleido Intelligence suggests that annually $680-billion will be spent in global trade by 2025 being facilitated through BNPL.  

This demand is driven by a generation that values instant, seamless purchasing but seeks alternative payment methods due to their wariness of debt. BNPL offers a short-term, interest-free solution for breaking up larger purchases into manageable payments. As technology enhances the payments ecosystem, people are getting greater convenience and ease of use, capturing the real value of BNPL – getting what they want when they want it and easily. 

In South Africa, BNPL is becoming increasingly popular, with the market dominated by two major players — Payflex, owned by FeverTree Finance, and PayJustNow, with 85% held by Homechoice International — both of which are gaining traction alongside a handful of smaller competitors.

As merchants recognise the opportunity to introduce BNPL into their offerings, it’s important to remember that this is an emerging market with many players looking to disrupt. Therefore, selecting the right BNPL partner is crucial, focusing not only on immediate solutions but on long-term scalability and seamless integration with your existing payment stack and digital infrastructure.

To make an informed choice, merchants should ask their payment providers the right questions. Some of these questions include:

How flexible are the payment options for your client?

BNPL models are rapidly evolving and there are a variety of different payment terms. South Africa’s first-to-market model in the industry was the “buy in 4” solution where the customer pays 25% up-front and then makes 3 subsequent instalment payments. 

As the industry is evolving, we are seeing ”pay in 2, 3 or 6” instalment models emerging. Payflex themselves have recently launched a “Pay in 3” solution which they believe is also a good fit for the South African market.

Are you providing the best payment solution for your customer? 

 Customers are the lifeblood of your business and while the attraction of BNPL solutions are obvious, you don’t want short-term gains to deliver long-term pain for your business. 

A key concern around BNPL offerings globally is that they typically operate outside of the jurisdictions of credit bureaus, and this is perceived to add risk. Interestingly, the major operators in the South African market in fact share information with the major credit bureaus adding credibility to the local offering. 

Merchants need to find the balance between a great shopping experience and long-term sustainability of their clients.  

How sustainable is your payment partner? 

The South African market is relatively concentrated with two major players operating in the BNPL sector. However, new venture-capital backed fintechs are constantly emerging and they all have steep run rates and customer acquisition targets. 

The Bank for International Settlements highlighted this as an industry risk in 2023 and elevated interest rates and consumer strain has seen a number of smaller players on the verge of bankruptcy. Margins in the BNPL industry are small as providers earn between 4% and 6% from merchants and still have to carry the cost of processing, acquiring, carrying the interest on the debtors’ book and covering bad debts – and all of these before paying for their overhead structure. 

Investing in a payment partner should be a long-term collaboration as merchants invest time and resources into integrating into these platforms.     

Is the BNPL operator aligned with your interests as the merchant?

 Getting a retail business off the ground is not easy and building client trust takes time. Does your payment partner or BNPL operator have an economic interest or strategic partnership with a direct competitor where your access-to-market could be utilised to help them grow their market share? 

Ideally, you’re looking for a payment partner who is independent and is going to focus on their core business rather than using your client base as a feeder for other operations. Business models are made easier today by plugging and playing the right technology partners with each one focusing on their core business resulting in a stronger overall drive towards growth and sustainability. 

Ultimately, the success of BNPL in the retail sector hinges on the ability of payment providers to position themselves as collaborative partners. Instead of vying for control or competing for customer loyalty, BNPL providers should focus on supporting retailers in enhancing the shopping experience.

Michelle Janse Van Rensburg is an accountant and tech entrepreneur, having started and managed a variety of businesses. She is the founder of Nimacc Business Lounge and is passionate about embracing technology to help entrepreneurs do better businesses.