Challenges of Buy Now, Pay Later in Nigeria’s fintech space

The world of Buy Now, Pay Later (BNPL) is making waves in the global fintech space, with an estimated market value of nearly $5 trillion. However, in Nigeria, the low credit information system poses a significant challenge for digital lenders looking to tap into the potential of BNPL. Ugonna Iheme, Advisory Lead at Stears Data, shed light on the intricacies of this payment model in a recent interview with CNBC Africa. BNPL, as Iheme explained, is a payment model where customers make purchases and then pay for them in installments at a later date. This concept is not new, as vendors have historically allowed customers to buy now and pay later. However, with the advancement of technology, this process has been digitized, allowing for seamless installment payments both online and offline. One of the key factors influencing the success of BNPL is the availability of credit information. In countries with well-developed credit systems, companies can quickly assess a customer's creditworthiness through instant credit checks. This is where Nigeria faces a challenge, as its credit infrastructure lags behind that of other nations, making it difficult for lenders to make informed credit decisions instantly. Despite this challenge, Nigeria has made significant strides in improving its payment infrastructure, thanks to platforms like Paystack and Flutterwave. These advancements have enhanced the processing speed of payments, creating a more efficient ecosystem for BNPL providers. Another crucial aspect to consider is the range of partnerships that BNPL companies can form. While in some countries, BNPL is used for a variety of purchases, including everyday items, in Nigeria, it is primarily limited to high-ticket products like electronics and appliances. Expanding the scope of BNPL to encompass a wider range of goods could potentially drive its adoption among a broader consumer base. When it comes to fostering the growth of BNPL in Nigeria, scalability is key. Global BNPL giants boast millions of users, a feat that Nigerian companies aspire to achieve. However, the current focus on high-end products limits the pool of potential users, making scalability a challenge. To overcome this hurdle, Nigerian firms will need to strategize on how to expand their reach both within the country and beyond. Comparing Nigeria's BNPL landscape to that of other regions, such as Latin America and Southeast Asia, reveals the impact of established credit systems on scalability. Countries with robust credit infrastructures have seen BNPL flourish at a faster rate due to their ability to make informed credit decisions swiftly. As for the future outlook of the BNPL industry in Nigeria, Iheme suggests that it will closely mirror the country's macroeconomic conditions. The growth of BNPL is intertwined with the overall economic well-being of the nation, as consumer purchasing power directly influences the adoption of e-commerce and, subsequently, BNPL services. In conclusion, while challenges persist, the potential of BNPL in Nigeria's fintech space remains promising. With continued advancements in payment infrastructure, strategic partnerships, and a focus on scalability, BNPL providers in Nigeria can carve out a niche in the dynamic world of digital payments.