How the ‘buy now pay later’ model is changing the credit landscape

The Buy Now Pay Later model is revolutionizing the credit landscape globally, offering consumers a more flexible and convenient way to shop online. The concept has gained significant traction in regions like Europe and the US, attracting major investors such as Twitter and Apple. However, the adoption and impact of this trend in Africa is a topic of discussion and scrutiny. To shed light on the situation in Africa, Paul Behrmanni, the CEO of PayFlex, shared insights in an exclusive interview with CNBC Africa. PayFlex's Buy Now Pay Later model differs significantly from traditional credit systems, offering customers the ability to split payments into four interest-free installments over a six-week period. This unique approach sets it apart from conventional credit options that often come with fees and interest charges. Merchants using PayFlex pay a small premium for accepting this payment solution, shifting the transaction costs away from the customers. PayFlex generates revenue through commissions charged on each transaction, ensuring a sustainable business model. Despite concerns about the ease of access to credit during the challenging economic landscape of COVID-19, PayFlex emphasizes that its product is not a credit service but a payment facilitation tool. The platform targets small to medium purchases that customers can afford to repay within a short timeframe, promoting responsible spending. Credit checks are conducted to assess a customer's ability to meet payment obligations, with approval rates based on creditworthiness. The default rate for PayFlex customers remains low, around one to two percent, reflecting the successful repayment behavior of users. In the event of a missed payment, customers receive reminders and incur a late payment fee to cover processing costs. With over a thousand merchants in the online fashion segment, PayFlex aims to expand into the retail market and potentially venture beyond South Africa in the future. While focusing on growth opportunities within South Africa, the company envisions further expansion across the African continent to introduce its innovative Buy Now Pay Later model to a wider audience. As the digital economy continues to evolve, PayFlex remains committed to providing a seamless and consumer-friendly payment experience for online shoppers in Africa and beyond.