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Buy Now, Pay Later: Risk vs value considerations for merchants

By , Head of Partnerships, Peach Payments.
24 Jun 2024
Anine de Kock, Head of Partnerships, Peach Payments.
Anine de Kock, Head of Partnerships, Peach Payments.

E-commerce merchants can’t afford to ignore the advantages of Buy Now, Pay Later (BNPL) facilities and alternative credit solutions, but they should choose their BNPL partners with care.

This is according to Anine de Kock, Head of Partnerships, Peach Payments, who says exponential growth in e-commerce and the ongoing credit dependencies of South African consumers make BNPL facilities a must-have for merchants.

De Kock notes that the Online Retail in South Africa 2024 report by World Wide Worx, compiled in partnership with Peach Payments, Mastercard and AskAfrica, found that the local e-commerce sector is approaching R71 billion in sales. It is expected to account for 10% of total retail by 2025.

Benefits to consumers

“Ten percent is massive,” she says. “Payment options play a big part of this, with consumers increasingly preferring alternative payment methods such as mobile wallets. Also important is access to BNPL – or instant credit.”

BNPL differs from credit cards in that consumers carry the costs of their credit card facilities and interest, whereas BNPL comes at no cost to the consumer, with the merchant paying the costs.

“BNPL through providers like PayFlex and ZeroPay makes it possible for consumers to access the products they need – such as school uniforms and stationery – without having to incur payday loans with high interest rates. It can also be used as a payment mechanism by service providers, such as doctors and veterinarians, allowing customers to access the care they need immediately, and pay it back over time,” she says.

Offering BNPL can bring customers and drive sales to an e-commerce business. However, merchants should take care to select the right BNPL partner, De Kock says.

Important considerations include the BNPL partner’s reputation, rates and terms, she says.

Repayment terms

The repayment terms are an important consideration. Most BNPL providers settle the merchant upfront, and charge consumers 10% upfront but take repayments in two-week or four-week increments. Some stipulate payment once a month for three months.

Other BNPL models do not settle the merchant immediately, but at the same intervals as the BNPL provider receives repayments.

“Merchants must ask who carries the risk for this credit: do you as the merchant carry the risk of credit being extended, and is there a chargeback risk? Do you then sell this item and only get your money in three months, or does the BNPL provider settle the full purchase price upfront and then collect it from the customer?”


De Kock notes that the costs associated with the BNPL facility are also an important consideration.

“If your markup is 10% and the BNPL is going to charge you 7.5%, it may not be sustainable. Similarly, if you are selling products priced in the R100 to R200 range and the BNPL only looks at facilities from R1000 up, your average products may not qualify for BNPL,” she explains. “You have to weigh that up against the cost of excluding significant portions of the market that are dependent on alternative credit lines like BNPL.”

De Kock adds that where BNPL providers don't offer a favourable rate, merchants may discover in the end-to-end calculations that offering BNPL can become too costly.

“You also need to consider whether your product category qualifies for credit. For example, if you sell airtime or products on the sensitive industry list, regulations - or the BNPL operator themselves - may prohibit those products being financed. Each BNPL maintains its own list of sensitive industries, and they may exclude credit for items such as tobacco, alcohol or betting.”

Reputation and alignment

Another consideration is the BNPL’s reputation and brand. De Kock says: “It is important to review the BNPL partner you align with. Check what customers are saying about them. You need to be very discerning and selective. Make sure you onboard a reputable and established partner that is a good brand fit for your business in terms of their customers, their marketing, and their reputation.”

She notes that some BNPL providers actively partner with merchants to help drive sales through joint campaigns, which can be of huge benefit to merchants.

On the ethics of extending credit, De Kock concludes: “The over-indebtedness of the South African market is not something a merchant can change. However, you can make sure that you partner with a reputable institution that affords loans, facilities and credit in a responsible way.” 

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