Buy now, pay later boom raises concerns about potential consumer over-indebtedness

Stephen Grootes speaks to Leonie van Pletzen, CEO of MicroFinance South Africa (MFSA), about concerns over the rapid growth of Buy Now Pay Later (BNPL) products in South Africa.

Listen to the interview in the audio player below.

Micro Finance South Africa (MFSA) is warning that without proper regulation and cooperation, Buy Now Pay Later (BNPL) services could inadvertently fuel higher levels of consumer debt.

MFSA is a body that represents micro-finance organisations that are registered. 

The group is raising concern about potential consumer over-indebtedness due to the ease of borrowing, lack of transparency, and inadequate regulatory oversight in South Africa.

BNPL service providers often offer short-term, interest-free payment plans that encourage higher spending

PayJustNow is a BNPL service that allows South African consumers to pay for purchases in three equal, interest-free installments. 

Speaking to Stephen Grootes on The Money Show, Leonie van Pletzen, CEO of MFSA says the unrecorded debt exposure to the consumer is what's most concerning.

"Buy Now, Pay Later products are exploding...more consumers are using this product because they can't get access to legal credit where they have to do an affordability or credit check. It operates outside of the National Credit Act."

- Leonie van Pletzen, CEO - MFSA

"This debt is not uploaded to the credit bureaus, which leaves other credit providers blind when they are offering credit."

- Leonie van Pletzen, CEO - MFSA

"Unlike regular credit under the NCA, BNPL providers often have limited obligations for affordability checks or disclosure of risks. So what we're seeing now is over-indebtedness, systemic risks..."

- Leonie van Pletzen, CEO - MFSA

"We are just calling on regulators and these Buy Now, Pay Later providers to work with the association to get to something sustainable."

- Leonie van Pletzen, CEO - MFSA

Scroll to the top of the article to listen to the full interview.