E-commerce merchants must weigh the risk vs value of a Buy Now, Pay Later partner

E-commerce merchants need to be careful when choosing a Buy Now, Pay Later partner. Picture: Shutterstock

E-commerce merchants need to be careful when choosing a Buy Now, Pay Later partner. Picture: Shutterstock

Published Jun 24, 2024


E-commerce merchants cannot afford to ignore the advantages of alternative payment methods like Buy Now, Pay Later (BNPL) or alternative credit solutions, however, they should practice caution when selecting a BNPL partner.

This is according to Anine de Kock, head of Partnerships, Peach Payments.

The Online Retail in South Africa 2024 report by World Wide Worx, compiled in partnership with Peach Payments, Mastercard and AskAfrica, found that the local e-commerce sector is growing in sales.

According to the report, the local e-commerce sector is approaching R71 billion in sales and is expected to account for 10% of total retail by 2025.

De Kock said that the rapid growth in e-commerce, along with the ongoing credit dependencies of South African consumers, make BNPL facilities a must-have for merchants.

Benefits to consumers

According to De Kock, BNPL is different from credit cards because consumers carry the costs of their credit card facilities and interest.

BNPL comes at no cost to the consumer, instead the merchant pays the costs.

“BNPL through providers like PayFlex and ZeroPay makes it possible for consumers to access the products they need – such as school uniforms and stationery – without having to incur pay day loans with high interest rates,” De Kock said.

“It can also be used as a payment mechanism by service providers, such as doctors and veterinarians, allowing customers to access the care they need immediately, and pay it back over time,” she says.

According to De Kock, offering BNPL can bring customers and drive sales, however, e-commerce merchants should consider the BNPL’s reputation, rates and terms before making a final decision on who to partner with.

Repayment terms

Most BNPL providers settle the merchant upfront, and charge consumers 10% upfront but take repayments in two-week or four-week increments, while some stipulate that payments must be made once a month for three months.

Other BNPL models do not settle the merchant immediately, but at the same intervals as the BNPL provider receives repayments.

De Kock said: “Merchants must ask who carries the risk for this credit: do you as the merchant carry the risk of credit being extended, and is there a chargeback risk? Do you then sell this item and only get your money in three months, or does the BNPL provider settle the full purchase price upfront and then collect it from the customer?”


“If your mark-up is 10% and the BNPL is going to charge you 7.5%, it may not be sustainable. Similarly, if you are selling products priced in the R100 to R200 range and the BNPL only looks at facilities from R1,000 up, your average products may not qualify for BNPL,” De Kock said.

“You have to weigh that up against the cost of excluding significant portions of the market that are dependent on alternative credit lines like BNPL.”

According to De Kock, if BNPL providers don’t offer favourable rates, e-commerce merchants may find that the end-to-end calculations can become too costly.

“You also need to consider whether your product category qualifies for credit,” De Kock said.

“For example, if you sell airtime or products on the sensitive industry list, regulations - or the BNPL operator themselves - may prohibit those products being financed. Each BNPL maintains its own list of sensitive industries, and they may exclude credit for items such as tobacco, alcohol or betting.”

Reputation and alignment

De Kock said: “It is important to review the BNPL partner you align with. Check what customers are saying about them. You need to be very discerning and selective.

“Make sure you on board a reputable and established partner that is a good brand fit for your business in terms of their customers, their marketing, and their reputation.”

According to De Kock, BNPL providers partner with merchants to help drive sales through joint campaigns, which can be of huge benefit to merchants.

On the ethics of extending credit, De Kock said: “The over-indebtedness of the South African market is not something a merchant can change.”

“However, you can make sure that you partner with a reputable institution that affords loans, facilities and credit in a responsible way.”

IOL Business