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Apple’s entry into the buy now pay later market has shone the light on a sector that players in SA hope will bring more consumers into the world of e-commerce.

During the Covid-19 pandemic, e-commerce more than doubled in size, but still makes up only a small portion of total retail sales. By some estimates, this number is below 5%. To help push up these numbers, flexible credit options such as buy now pay later have been touted as a catalyst in the growing ecosystem.

The model, which is offered by a number of online payments companies such as SA’s Payflex and PayJustNow, guarantees full payment to the merchant, while enabling customers to buy goods and pay small amounts upfront and the balances over time, usually weeks.

The model has been applied for about eight years for instance in the UK and Australia, where it has more than 11-million users. Prosus, through its financial technology unit PayU, invested in the business model, particularly in India.

Proponents say the service is a strong factor in helping to boost e-commerce adoption by hesitant consumers.

Last week, technology giant Apple put its weight behind buy now pay later saying it was entering the market through its payments platform Apple Pay, specifically for online shoppers. Apple created a buzz around the business model, which resulted in US buy-now-pay-later provider Affirm’s stock  losing more than a fifth of its value since the announcement on June 6 at the iPhone market World Wide Developers Conference. Analysts suspect that Apple will take up a large part of the market.

In SA, however, local players appear to stand a far better chance of growing, owing to low penetration of Apple devices and services. 

Even with more than a billion Apple devices sold globally they remain out of reach for most South Africans. According to data from web analytics company, Statcounter, Apple devices account for just more than 16% of smart devices in SA, up to May, with even lower penetration by Apple Pay.

As e-commerce has grown in SA, so has Payflex’s business, CEO Paul Behrmann says, admitting that it was tough to get the company off the ground. He credits the pandemic for providing a boost.

“It was quite a hard push at the start because bringing a new financial product to a country is a challenge. Customers don’t really understand what is interest free and how the product works. But we’ve grown, and I think Covid was definitely a catalyst to boost the growth of online shopping.

“Since launching in 2019, we’ve now had 300,000 customers use the service. We’re available across about 1,600 online merchants, so the growth has been phenomenal.

“Buy now pay later in SA is starting to become a better understood product. We see more customers taking it up every day, and as a product I think it will sit forever in customers’ wallets as an option that allows them to avoid getting into debt.

“The design of the product is such that it’s really meant for smaller items. Fashion is a perfect example. That’s where we play quite heavily.”

Payflex was recently acquired by Australia's Zip, which has more than 11.4-million customers globally.

Behrmann says consumers making use of buy now pay later tend to be those who already have access to credit cards or other forms of unsecured funding.

In a different part of the market Blue Label Telecoms, which specialises in selling prepaid airtime, electricity and ticketing, has its own take on the buy-now-pay-later model. The company is looking to extend small loans for airtime and electricity to consumers, by offering the service to the lower end of the market, based on consumer behaviour.

Airtime advance has become a popular service in SA. If someone runs out, a mobile operator can offer small amounts of R5, R10 or R20 that are automatically recovered when the next purchase is made.

Blue Label has so far only piloted the offering, and is looking to bring it to market in the coming months.



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