Buy Now Pay Later in Africa: A Rocketing FinTech Trend

buy now pay later africa

From Morocco to South Africa, the market is expected to grow. Chinese and Japanese companies already put boots on the ground, but the rising popularity of the BNPL industry is also attracting global BNPL platforms

In Africa, where most people are unbanked, BNPL activity is just beginning to pick up. Buy-now-pay-later (BNPL), a short-term consumer financing that allows shoppers to purchase products online and pay in instalments with nominal or no fees, is sweeping the global e-commerce sector.

In this framework, not surprisingly, banks, fintechs, financing companies, payment services providers, and merchants are considering how to get a slice of the action and have already launched - or are looking to roll out - BNPL services in Africa.

Today, retailers, both traditional or online, are embracing BNPL for the simple reason that they bring in more sales and new customers. Of course, it is impossible for many merchants to run their own BNPL service alone, that’s why they have partnered with a third-party BNPL supplier. These are often fintechs, finance companies, payment service providers, neobanks and more.

Despite the risks that involve BNPL practice, across the African continent, this service is starting to gain traction in many countries as digitally savvy and highly unbanked populations look to take advantage of the innovative payment solution. 

From Morocco to South Africa, the market is vibrant 

There are already dozens of BNPL brands active across Africa and the market is vibrant. ThankUCash, for example, a Nigeria-based multi-merchant rewards platform, last January announced a new $5.3 million funding round, part of which it plans to spend on adding BNPL infrastructure to its suite of services, which already includes cashback on purchases and deals from merchants. 

Last year, the South African fintech sector made waves after the Johannesburg-based BNPL player, Payflex, announced its acquisition by Australian firm Zip as part of the BNPL giant’s global expansion plans. The platform, launched in 2019, is considered the first and largest BNPL player in one of Africa’s biggest economies. The firm serves more than 135,000 customers, collaborates with leading local brands and counts over 1,000 active merchants today. 

North Africa is showing a growing interest in BNPL too. Morocco’s B2B e-commerce and FinTech platform Chari announced at the beginning of 2022, that it had secured a bridge round at a $100 million valuation as it plans to venture into the BNPL space, starting in Morocco before expanding to Tunisia and other French-speaking African countries, media reported. Given its very populous and consumer purchase-driven market, Egypt is another reality that is showing huge growth potential, with the BNPL trend rapidly catching on with shoppers amid rising inflation that is putting pressure on consumers. 

Recently, Egyptian FinTech company Sympl, announced a $6 million seed funding raise led by the United Arab Emirates’ Beco Capital, TechCrunch reported. Furthermore, Africa-based e-commerce giant Jumia, for its Black Friday sales, has partnered with National Bank of Egypt and other banking institutions to offer BNPL service to consumers at zero interest.

Japan invests in the Horn of Africa

The whole BNPL sector is moving fast. Last month, Lipa Later, a Kenya-based consumer credit and BNPL platform, raised $12 million from a group of international investors to expand its services across the region.

Launched in 2018, the platform became in a few years a top player in Eastern Africa and now is planning to enter Tanzania, Ghana and Nigeria, and expand in its existing markets, which are Kenya, Uganda and Rwanda. The platform already has exclusive partnerships with some retailers, such as Carrefour, across these markets, which allows both shoppers and customers to pay for products in monthly instalments.

By the way, Asian tech giants and banks are investing in the African hi-tech sector, boosting BNPL's new trend. Last year in December, Shu Jueting, spokeswoman of the PRC Ministry of Commerce, said how Chinese companies, following China-Africa Cooperation Vision 2035, are promoting partnerships in emerging areas such as the digital economy. 

Recently, even Tokyo decided to inject a huge wave of capitals in Africa. As the goal is right now countering Chinese influence in the region, Japanese financial and tech conglomerates decided, thanks to the government's support, to compete with their Chinese counterparts. Starting point, the Horn of Africa.

A survey conducted by the Japanese External Trade Organization (JETRO) showed that Kenya ranked first as the most attractive destination for Japanese companies aiming to implement investments. By the way, Japan is very active in Sudan and Ethiopia too. 

Back to the topic, in the last two years, SoftBank invested millions of dollars in the African hi-tech sector, as well as the Tokyo-based Uncovered Fund, which invests in early- and seed-stage startups in Africa. The Kenya-based BNPL platform, Lipa Later, was among five startups that received the funding. Lipa Later is today among the leading players in Kenya’s BNPL market. The startup is becoming very popular abroad too and is facing competition from South Africa’s Payflex and PayJustNow, and Nigeria’s PayQart and Carbon Zero.

 Different shopping culture could explain BNPL success 

Why is BNPL so popular in Africa? As we previously assumed, a large part of Africans are unbanked or underbanked, plus, the financial uncertainty caused by the pandemic has taught consumers to be more cautious with their spending habits. In our analysis, we should not underestimate cultural issues too.

Layaways and BNPL

Africa has a long-established and prevalent tradition of lay-bys, also known as layaways. Under these agreements, a consumer can purchase an item by interest-free instalments. These are usually over a period of no more than three months, and often require a minimum down-payment of 20%. 

This habit is actually very similar to BNPL practice, moreover, a few years ago, the lay-by tradition has followed shopping online and fintechs are digitizing the whole payment process. For example, Spredda – a Nigerian online marketplace – offers a lay-by option at checkout. In South Africa, LayUp, is doing the same. The BNPL became the natural evolution of this practice, and it will be interesting to see what proportion of lay-bys BNPL manages to replace.

A perfect “growing market” storm

Economic instability caused by the pandemic new waves in the last few quarters led to a growing interest among consumers for BNPL schemes. Consequently, the adoption of the BNPL product has surged significantly over the last four to eight quarters in Africa. Furthemore, due to its newness, there exists plenty of opportunity within the BNPL landscape for all stakeholders involved. There is no dearth of service providers, and the upsides for both merchants and consumers are evident. 

Growth in the scene is also expected to carry on an already bullish trend. Only in South Africa, for example, the BNPL payments market is expected to grow by 97.5% on an annual basis to reach US$ 457.3 million in 2022, according to Investment Opportunities Report 2022. The rising popularity of the BNPL industry in the African market is also attracting global BNPL platforms, who are looking to capitalize on the high-growth potential offered by the region. All of these trends in the BNPL sector are a clear indication of the future growth prospect in all African countries.