Fintech leader's predictions of SA's payments landscape
The silver lining of the Covid pandemic for many businesses has been the acceleration of online shopping in South Africa. Faced with fewer choices, shoppers adopted new spending habits. They also embraced new payment options, like interest-free buy now pay later (BNPL) offered by Payflex.
Payflex CEO Paul Behrmann
In-store, the use of QR code payment systems and card tap-and-go payments has increased dramatically as customers prefer no-touch options. While there are several innovative app-based payment systems which offer unique features and convenience, customers can become confused about which app serves which purpose. They then need to download each app and navigate a new system.
Few of the options are compatible with one another and there is no single product that meets all or most of their needs. The landscape currently seems clunky.
Ubiquitous and easy
In the in-store space, I predict that payments will migrate to single systems that offer simplicity, convenience and safety. NFC (near field communication) technology provides two-way communication between two devices in close proximity. In South Africa, the next iteration of NFC is that most smartphones now come with a built-in NFC chip. And it is a game-changer.
Leading payment services, including Google Pay, Apple Pay, and Samsung Pay, use NFC for cashless payments. All the user needs to do is add their card number(s) to the app. To make a payment, you tap the NFC tag and the secure payment is done almost immediately.
This provides an open loop system which is universally accepted, providing users with a singular mode of payment. Within just a couple of weeks of activating the NFC function on my phone, I stopped using any other form of payment.
From a technology perspective, NFC is just too good an experience not to work. It will evolve into something we see being widely used for all in-store purchases.
While the payments space is known for slow-moving behavioural change, the tap-and-go concept took off quickly in South Africa.
The rise of BNPL in SA
When the product value proposition is strong, users will continue to download apps, and will use the most useful payment options, including Payflex for BNPL. So what’s driving the adoption of BNPL?
Payflex is the largest BNPL player in South Africa. A recent survey revealed that almost 80% of shoppers would not have made their most recent online purchase if not for the BNPL offering.
It allows qualifying customers to split the cost of their purchases into four equal instalments, interest-free. The process is simple and quick - the assessment is done in seconds and customers only pay a fee if they miss a scheduled instalment. Payflex accepts any Visa, Mastercard or American Express card (debit, credit or cheque).
Shoppers definitely prefer to pay off their purchases in interest-free instalments when given the choice. The volumes reported by SA merchants mirror the global trends, which is driving a massive rise in the number of merchants offering BNPL.
Sales for online stores increase by 30% on average with Payflex as a payment option, and there are improvements in other key business metrics like revenue and new customer acquisition.
Payflex grew from a shopper base of 2000 to 120,000 in 12 months and its customer base soared from 70 merchants in 2019 to over 850 active stores this year.
Payflex also offers immediate card payments through its platform. We have seen that once customers have tried something new and had a good experience, they are unlikely to go back to old ways of paying. When people experience payment systems that are safe, easy and quick, legacy systems start to become defunct.
BNPL has not only changed how consumers pay, but how much they buy, how often they buy and where they shop. As Payflex enters the in-store market this year, customer behaviour changes will be interesting to watch.
As Payflex continues to make it easier for qualifying customers to purchase goods without incurring high credit costs, the remarkable growth BNPL has achieved in the online space is expected to be mirrored in the in-store space.
About the author
Paul Behrmann is the CEO of Payflex.