Rising e-commerce and digital adoption are accelerating buy-now-pay-later growth across South Africa.
South Africa’s buy-now-pay-later (BNPL) market is rapidly expanding, driven by growing consumer demand for flexible payment options, rising e-commerce adoption and increasing financial pressure on households.
This is according to new research by TransUnion South Africa, titled: “Access, visibility and consequence: Understanding the role of buy-now-pay-later in South Africa’s credit ecosystem”.
The report reveals that BNPL is evolving beyond a simple payment tool and is increasingly serving as an entry point into the formal credit system for millions of consumers.
According to the study, 37% of local BNPL users are either new-to-credit, or they are underserved consumers, demonstrating the product’s growing role in promoting financial inclusion.
TransUnion attributes the growth of BNPL to several converging factors, including changing consumer expectations, the rise of e-commerce and mobile commerce, affordability pressures and merchant adoption and conversion.
“BNPL is rapidly reshaping the way consumers engage with short-term credit in South Africa,” the report states.
“What has often been viewed narrowly as a payment innovation is becoming something more consequential: a new point of entry into the formal credit ecosystem, particularly for younger, earlier-stage and less credit-dense consumers.”
Furthermore, consumers are increasingly seeking payment options that are transparent, predictable and easier to access than traditional forms of credit, it notes.
BNPL products have responded by offering short-term, transaction-based financing that is directly linked to purchases and typically carries fixed repayment terms.
“TransUnion found that consumer awareness of BNPL stands at 79%, while 62% of surveyed consumers currently have a BNPL product. In addition, 37% reported repeat usage over the past 12 months.”
Younger consumers lead adoption
The research shows BNPL has attracted a younger customer base than traditional credit products.
“BNPL consumers are not simply a marginal subset of traditional credit users. They represent a distinct profile: younger, earlier in their financial journey, concentrated in lower-to-middle income bands and often lighter in their overall participation in formal credit,” the report says.
More than a third of BNPL users are members of Generation Z (between the ages of 14 and 29), while most earn less than R25 000 per month, it states.
The study found that approximately 17% of BNPL customers are genuinely new-to-credit, while nearly 20% are classified as underserved consumers with limited credit histories.
However, the South African Reserve Bank (SARB) recently warned in its Financial Stability Review that BNPL products can contribute to consumers’ over-indebtedness.
The bank highlighted that BNPL often enables consumers to juggle multiple payment obligations simultaneously, while facing fewer affordability checks than traditional credit.
“BNPL, coupled with online gambling, may contribute to rising financial vulnerability among households already dealing with elevated cost-of-living pressures and tighter financial conditions,” warned SARB.
The findings also challenge a common assumption that BNPL users are riskier borrowers than traditional credit customers.
“Early performance data does not support the assumption that BNPL consumers are inherently riskier than comparable non-BNPL peers,” the report states. “In many cases, their arrears performance is comparable to, or better than, other consumers across unsecured credit products.”
TransUnion found that BNPL users frequently demonstrate equal or lower delinquency rates than comparable non-BNPL consumers across credit cards, retail credit and personal loans.
