There has been a heavy rise in adopting Buy Now, Pay Later (BNPL) products and services in Africa. Several startups are taking up the challenge and offering innovative deferred payments services for consumers on the continent. But, just as supply is a factor of demand, BNPL services are heavily being lapped up by merchants who see this as a perfect way to get more consumers shopping from them.
What is the BNPL system?
Buy Now, Pay Later (BNPL) is a type of short-term financing that allows consumers to make purchases and pay for them at a future date, often interest-free. Also referred to as “point of sale installment loans,” BNPL arrangements are becoming an increasingly popular payment option, especially when shopping online. BNPL services enable merchants to increase conversion rates, improve customer satisfaction and grow basket sizes.
BNPL is a two-edged sword. It’s essentially one of the most tangible ways to address the credit gap in this part of the world. It sounds good to the ears, as it helps get the merchants to sell more or get more customers to make orders; on the flip side, customers can now buy more at any time, as they do not have to pay immediately. While it may seem like a death trap, what would kill this beautiful service, especially on the merchants’ side, is the waiver of basic checks for typical lending.
BNPL products typically rely on third-party data from credit bureaus to assess the likelihood of a customer’s ability to pay back. This data can become archaic quickly, as reports are not updated daily. This is why companies like Hadada Financial exist. Using Hadada, you can assess your customer’s financial risk with real-time data. Hadada aggregates financial data, which can help merchants make better credit decisions.
It gets more interesting, as it is worthy of noting that Africa’s addressable market is quite huge. This is because BNPL doesn’t only pertain to e-commerce; it can be done even while playing at an on-site store. A myriad of startups can benefit from having access to such data. From lending agencies such as Branch, Carbon, FairMoney to car sales platforms like Autochek and Cars45 to lifestyle service providers such as Eden, the list is endless. In September 2021, Australian company Zip acquired South Africa-based BNPL player Payflex, a deal that indicates Africa may be ripe for buy-now-pay-later services.
How Hadada is Tackling the Challenge
With Hadada, merchants can leverage real-time access to a customer’s transaction history to assess their risk and loan worthiness, thus significantly increasing their underwriting capacity and preemptively managing default rates.
At Hadada, we empower Nigerian merchants, FinTechs, Lending Agencies & MFBs to offer loans, sell their products and make credit decisions more efficiently by helping them aggregate alternative financial data across sources.