Buy now pay later: A different kind of credit

In the past, when a consumer wanted to purchase a product on credit, they only had two options: they could either purchase the product using their credit card or buy the product through a lay-by option, the latter being the least preferred.


With the rise of online shopping and the ever-growing e-commerce platform, buy now pay later (“BNPL”) is a market disruptor that has shaken up traditional buying and selling on credit. BPNL works by allowing customers to purchase products and pay for them in instalments. These instalments are spread over a short period of time, usually a few weeks or months with no interest payable, and penalty fees are only charged if an instalment is late.


BNPL is a differentiator in that it is directly opposed to the traditional way of banking which offers high-interest rates when lending, strict requirements such as time-consuming application processes, income verification checks, and the like. The ease of use makes BNPL more appealing to tech-savvy consumers and is of particular relevance in countries where credit is difficult to obtain. 


The introduction of BNPL has disrupted the traditional credit market, creating new opportunities for consumers to finance their purchases. The lack of specific regulations for this industry can pose challenges and risks for both consumers and businesses. With the convenience and flexibility that BNPL offers, it's not surprising that it has gained so much popularity, but it's important for consumers and businesses to understand the potential risks and regulatory considerations before using these services.


BNPLs do not have their own specific regulating laws but this does not mean that the industry is not regulated. The use of BNPLs may trigger a number of regulatory considerations, the most important of which are:


  • The National Credit Act;
  • The Electronic Communications and Transactions Act; and
  • The Protection of Personal Information Act.


For organisations looking to offer BNPL solutions to their clients, it is critical that a proper risk assessment is conducted to ensure that the organisation complies with applicable laws.




Read the original publication at ENSafrica.

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