Can fintechs get Nigerians to buy now, pay later?

May 23, 2022|Fadekemi Abiru

BNPL (Buy Now Pay Later) has become the talk of the credit and fintech industry. CredPal’s (Nigeria) recent $15 million raise to expand the scope of its BNPL product, Lipa Later’s (Kenya) Series A, and MNT-Halan’s BNPL (Egypt) launch are just a few data points to show that the appetite for credit (with BNPL as a solution) across the African continent is increasing.

Key takeaways:

Buy Now, Pay Later might be the hottest trend in the fintech industry, but current market trends suggest that these companies need to double down on the value they deliver to their customers so they can survive
One way BNPL players can do this is by positioning themselves as a viable substitute to existing alternatives such as credit cards
BNPL and credit cards are alike because they both loosen the intertemporal budget constraint. However, both are fundamentally different because credit card companies earn their profits off the consumer, while BNPLs make money from merchants

Even in the face of growing concerns around a tech bubble and global market contractions, there is no denying that fintech, because of its market-enabling and market-creating opportunities, is a big part of the innovation ecosystem in Africa. In turn, credit is a big part of fintech. According to an EY report on the fintech industry, lending accounts for 23% of fintech businesses, coming second to payments, which account for 38%. However, when you break down payments further, 17% are consumer payments and 19% are SME payments, compared to 23% for consumer lending. So, as a single sub-sector, there are more fintechs in consumer lending than any payments sub-category.

As I have argued previously, there are good reasons for the increased buzz around BNPL. The structure of BNPL gives shoppers the ultimate convenience of instant credit access with zero interest rates, and even nearly hassle-free repayment options. By allowing consumers to instantly access a product and defer payment, BNPL helps level the “shopping” field for consumers across income levels and credit access. Thus, it triggers consumer buying behaviour (which is a good thing for stimulating any economy) by reducing the cost of purchase at the point of sale.

And it’s not just consumers that stand to benefit.