Buy now, pay later a convenient way to buy if you qualify

The buy now, pay later system where you can buy something and pay it off in three instalments without being charged any interest is a fantastic way to buy, but only if you qualify. It can also benefit the economy to buy more expensive items this way rather than using your credit card, because it leaves you with more expendable income instead of paying interest.

Various debt indexes have shown over the past few months that consumers are cutting their spending because they simply have no money to spend. This in turn affects economic growth, because if consumers do not spend more money, there cannot be any growth in the economy.

With the buy now, pay later (BNPL) system, consumers can buy items and pay them off over three months. You must pay the first instalment immediately, and the other tow over the next two months. For example, you can buy a new set of tyres for your car for R12 000 and pay R4 000 immediately, another R4 000 in a month’s time and the last R4 000 after another month.

Or you can whip out your credit card and pay R12 000 in one go and end up paying almost R14 000 if the interest is added, Craig Newborn, CEO at PayJustNow, a BNPL company that started operating in August 2019, says.

“If you buy now and pay later, you can use the money you save on interest to buy more, which in turn helps the economy to grow, which will lead to creating more jobs as manufacturing increases.”

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Largest and smallest buys in 2024 so far

The largest purchase PayJustNow funded so far in 2024 R73 200 for electronics and R69 800 for energy and solar solutions. However, consumers do not only spend lots of money when they buy now and pay later.

Newborn says his company had some orders for R350 to R400 in categories such as clothing, big brand stores and shoes. “These are primary repeat orders where our customer is using us for the convenience of not having to take out their card each time because we saved it the first time.”

It seems that south African consumers are very keen to use this way of paying for goods, with PayJustNow growing by 104% last year when it added 670 000 new customers at about 50 000 to 100 000 new customers every month. It now has 1.3 million customers and 70% of them are women, while 75% are recurring customers.

Consumers use the buy now pay later option to buy tyres for their cars, inverters, LED globes for the whole house to save electricity, generators and even saddles for horses. Even high-income consumers use the option.

“One of our customers wrote to us to say that he used buy now pay later to pay for a good pair of shoes for a job interview. He got the job!” Newborn says.

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Who uses buy now, pay later?

Newborn says two kinds of consumers use the system: customers who use it because it is convenient, because you details are saved and you can quickly pay for something such as a set of tyres. The other group consists of consumers who really need something but do not have the full amount at their disposal immediately but can afford three instalments.

However, Newborn says consumers are still a bit hesitant to use the service because they think it is too good to be true, but they soon find that it does in fact work.

PayJustNow only has a 2% default rate where people fail to pay the second and third instalments, probably because the vetting process to be approved to buy now and pay later is so strict.

Newborn says the requirements for new customers are that they must have permanent employment, earn at least R6 000 per month after deductions, have at least the first instalment to pay immediately, not have adverse listing at the credit bureaus and not be under debt review.

The company also conducts an affordability assessment to see if consumers have too much debt. Any form of duress will disqualify you, as well as irresponsible spending, such as ordering alcohol at three in the morning or using you cards often as casinos.

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What you cannot use buy now, pay later for

You can also not use PayJustNow to buy food, alcohol or pay for playing at a casino or anything that will not last until you made the third and last payment. A biometric validation is used to ensure that your account cannot be used fraudulently.

“One of our biggest challenges is fraud committed by syndicates and it has us on our toes all the time – not because of fraud on our accounts, but because people think our offer is so good that it must be a scam by fraudsters, especially since they do not pay any interest.”

Who pays for the service to consumers then? Newborn says the merchants who join the scheme pay for it, but they also receive many benefits, such as being listed on the PayJustNow website which is especially good for small businesses. PayJustNow is available at 2 500 merchants in South Africa.

“If a consumer is, for example, looking for genuine leather shoes, he can go to our website and type in leather shoes and a small business that just started out making leather shoes will pop up, giving the small business as much of an opportunity to sell as big stores.”

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Protection from fake websites

With so many fraudulent online ‘businesses’, it is also good to know that a small business you find on the website really exists.

Newborn says the merchants listed by PayJustNow go through a comprehensive Know Your Client, Anit-Money Laundering and Credit Check before they are allowed to trade on the platform.

“This is vital for us to protect our consumers. PayJustNow uses stringent vetting processes that take place on merchant sign up, which provides confidence for customers that if they shop with PayJustNow, they shop at retailers they can trust.”

He says PayJustNow is also PCI DSS compliant and is verified by independent security auditors, which means that merchants and payment processors adhere to the leading-edge security requirements of managing data while customers are making payments. This includes storing information of the payment processor and using encryption, masking, hashing and truncation to safeguard it.

“For consumers, shopping using PayJustNow BNPL is a whole lot safer, thanks to the successful roll-out of the selfie verification in 2022. The tool is built-into the PayJustNow app and allows users to proactively verify their identity with Home Affairs quickly and easily before making their purchases, which dramatically reduces the risk of fraudsters getting their hands on your personal information. “

PayJustNow recorded 27.3 million merchant referrals over the past 12 months, up from 11 million in the previous period. “Our deals page also continues to drive significant merchant value with 3.2 million clicks over the past year. Merchants using our platform saw a 50% increase in basket size with strong conversion rates, highlighting local consumers’ appetite for the convenience of BNPL.”

Newborn says his company first focused on instore business, but in 2024 they will move their focus to online as more people are choosing online shopping.

“We have a social contract with our customers resting on the principle of give before you get. I trust you to pay me back if I give you the money to pay.”