Buy now, pay later pitfalls

DANGER: CONVENIENT WAY TO SHOP HAS POTENTIAL TO LEAD CONSUMERS TO OVER-INDEBTEDNESS

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Buy now, pay later entered South Africa a few years ago as a convenient way to buy goods on credit and pay off within three months without paying any interest.

It has become a very popular way to pay, but as with any good idea, there are also disadvantages consumers should beware of, such as over-indebtedness.

Leonie van Pletzen, CEO of Micro Finance South Africa (MFSA), expresses her concern about the rapid growth of Buy Now Pay Later (BNPL) products.

"BNPL has a place in South Africa's financial ecosystem, but like any form of credit, it must be transparent, responsible and sustainable. We want to work with all BNPL players to develop an industry code that protects consumers, supports retailers and ensures that this innovation strengthens and not undermines consumers' financial health," she said.

MFSA's key concerns include:

► Unrecorded debt exposure: Consumers may hold multiple BNPL accounts, but these obligations are not always visible to other credit providers or credit bureaus;

► Consumer protection gaps: Unlike regulated credit under the National Credit Act (NCA), BNPL providers often have limited obligations for affordability checks or disclosure of risks;

► Systemic risk: