Financial Flexibility & Growing Portfolio with Buy Now, Pay Later & More!

The Buy Now, Pay Later (BNPL) market is booming. Data from the TransUnion Consumer Pulse Study for Q4 2024 shows that 74% of South Africans are aware of BNPL, with 50% having used the service more than once in the past year.

Buy Now, Pay Later

Once a niche payment option, Buy Now, Pay Later (BNPL) has become a mainstream credit alternative, attracting consumers who want to avoid credit card interest or manage payments with more flexibility. While installment plans have existed for years, the rise of digital adoption and e-commerce has propelled BNPL into the spotlight, making credit more accessible and convenient. Today, consumers can spread payments over three to four installments, making purchases more manageable.

Beyond everyday shopping, BNPL supports a range of financial needs. Consumers use it for bulk grocery purchases from retailers like Makro or Game (owned by Massmart, a Walmart subsidiary), investing through EasyEquities, and covering travel, clothing, necessities, and discretionary spending.

BNPL also plays a role in financial inclusion by leveraging alternative data to assess affordability, granting credit access to individuals with limited credit history. “BNPL empowers underserved communities,” says Wesley Billett, CEO of HappyPay. However, concerns remain regarding over-indebtedness and the lack of credit reporting. In response, industry leaders are working to integrate BNPL data into credit scoring models, promoting responsible borrowing and financial stability.

Reflecting the rising demand for flexible payment solutions, HomeChoice International reported a 150%+ increase in Gross Merchandise Value (GMV) from its BNPL offering in its latest annual financial results. As the market grows, industry leaders continue to balance accessibility with responsible credit management.

"The buy-now-pay-later trend, which started a few years ago overseas, has now firmly taken root in South Africa. The booking in the PayJustNow business is over a hundred thousand new customers every month. And it’s viral communication, word of mouth; customers are sharing with their friends this smart new way to shop," HomeChoice CEO Sean Wibberley said.

In South Africa, BNPL has experienced significant growth, expanding at a 23.5% CAGR (Compound annual growth rate) from 2021 to 2024. It is projected to rise at a 9.8% CAGR through 2030, reaching USD 1.30 billion from USD 717.3 million in 2024.

Emerging Forms of Credit

Collateral-based lending has long existed but was previously accessible only to a select few. Purple Group’s EasyEquities is changing that.

EasyEquities allows investors to use their shares as collateral (EasyCredit) to access funds without selling their investments. This feature enables users to unlock liquidity while maintaining exposure to potential market growth. Additionally, South African government bonds can also be used as collateral for loans, a feature unique to EasyEquities, providing investors with an alternative way to leverage their fixed-income assets.

EasyCredit Head of Product Mbulelo Mpofana added, "With inflation stabilizing and the Reserve Bank embarking on a rate-cutting cycle since late last year, demand for EasyCredit has been rising. We’ve seen an impressive 155% increase in the value of loans granted during the first half of our current financial year compared to the same period last year. Much of this growth was driven by savvy clients accessing funds to maximize their Tax-Free Savings Account annual contribution allowance before the end of the tax year - a pretty smart way to take advantage of the product."

The ability to leverage investments for capital access without liquidating assets is a powerful financial tool. Investors can maintain market exposure while unlocking liquidity, integrating with financial innovations like BNPL to access credit without relying on high-interest debt. By combining investment-backed lending with BNPL, investors can optimize their cash flow, ensuring they stay invested while meeting financial needs. This approach highlights how capital markets and modern credit solutions can work together, allowing investors to grow and protect their wealth while maintaining financial flexibility.

Conclusion

When using BNPL or loans backed by shares as collateral, it’s crucial to monitor fees and interest costs. BNPL may seem interest-free initially, but late payments can result in penalty fees that accumulate quickly. Similarly, borrowing against shares provides liquidity without selling investments, but interest rates on these loans can fluctuate, affecting overall costs. Failure to meet repayment terms could also lead to the liquidation of pledged shares. To avoid unnecessary expenses, borrowers should understand the terms, repay on time, and ensure the loan remains manageable within their financial strategy.

Overusing BNPL can lead to overspending and debt if installments accumulate. Without careful budgeting, missed payments and fees can strain finances. Similarly, with EasyCredit, investors can only borrow up to 33% of their portfolio’s loan-to-value (LTV), meaning the loan amount is limited based on qualifying investments. To stay in control, investors should track their obligations and borrow only what they can afford.

Furthermore, when investing in BNPL providers or platforms that allow borrowing against shares, it’s essential to weigh the opportunities and risks. BNPL firms benefit from consumer demand but face default risks and regulatory challenges, while share-backed loans offer liquidity but are exposed to market volatility. Investors should evaluate risk management, revenue models, and economic resilience to make informed decisions.

Government bonds offer a reliable way to earn fixed income by lending money to the government in exchange for regular interest payments

In the world of personal finance, investing, and building wealth over time, earning income through investing is one of the most talked-about topics.

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