Buy now, pay later (BNPL) can be a useful way to shop for cash-strapped Januworry consumers. Instead of paying upfront, you make staggered payments without high interest charges. But BNPL loans are generally not reflected in shoppers’ credit records and remain unseen by other BNPL providers, making it dangerously easy for South Africans to become over-indebted.
BNPL evolves
Float, Africa’s first card-linked instalment platform, only allows credit card holders to use their existing credit to split purchases into flexible, interest-free monthly instalments. With payment periods of up to 24 months, this model is well suited to big-ticket purchases and, because it does not issue consumers with new credit, ensures that shoppers don’t overextend themselves.
“When you use Float to make a purchase, your available credit is reduced by the full purchase amount, acting like a safety net to ensure that you don’t overspend. Float charges one interest-free instalment each month. Effectively, it simply breaks the purchase into manageable, monthly repayments on your credit card,” says Alex Forsyth-Thompson, CEO of fintech Float.
The monthly instalments allow you to spread payments across salary cycles. For instance, a R10,000 purchase split into six equal instalments means you pay around R1,667 per month over six months. The same purchase using a regular BNPL provider would typically require a payment of R2,500 every two weeks and your purchase would need to be fully settled within six weeks.
Since no new credit is being offered, there is no sign-up, registration, or credit check process for consumers. Float is also the only BNPL that does not levy late fees or penalties.
Forsyth-Thompson says, “With high living costs and interest rates, South Africans need to avoid any new credit issued without the usual affordability checks. The fact that BNPL loans don’t reflect in credit records is a concern that is compounded by how easy it is to accumulate multiple BNPL purchases. Small payments can add up quickly and this could end badly. What starts as a smart decision to spread out payments can quickly evolve into a financial burden.”
Regular BNPL services are interest-free, but late payment fees can be as high as 25% of the purchase within just a few weeks.
Testament to Float’s ability to facilitate bigger purchases, the average order value on Float is around R10,000 – almost ten times the average reported by regular BNPLs of just over R1,000. The top three categories for BNPL purchases using Float are electronics (29%), furniture and home decor (22%) and appliances and gadgets (19%).
Merchant benefits
Merchants offering payment using Float benefit from 80% higher average order values and have access to a large customer pool of over 5 million pre-approved credit card holders in SA. Not only do these customers have existing credit, but they are generally not newcomers to managing debt and are generally more credit-savvy.
Float is fully customisable to meet each merchant’s needs, including the number of instalments offered to shoppers, the settlement terms and the channels they offer the payment option from.
