Buy now, worry later

CONCERN: BNPL BOOM RAISES THE RISK OF INCREASED CREDIT STRAIN

- Liesl Peyper

South Africa’s rapid adoption of buy now, pay later (BNPL) products is increasing the risk of consumers becoming overextended as this is not easy access to short-term credit is not yet regulated, and information is not commonly shared across credit bureaus.

That is the warning from Mauro Villarreal Garza, planning director for digital risk at LexisNexis Risk Solutions.

Garza told Moneyweb in an interview that BNPL has evolved into a popular form of lending that can improve cash-flow management for consumers, but also allows multiple credit facilities to be taken on simultaneously, with limited visibility of overall affordability.

“Consumers can get many loans at once and this can result in them taking on more debt than they can realistically repay,” he said.

BNPL is typically accessed through online digital, where it is integrated into digital checkout processes, making short-term credit available with minimal friction.