Beware: The dangers of Buy Now, Pay Later

Buy now, pay later entered South Africa a few years ago as a convenient way to buy goods on credit and pay it off within three months without paying any interest.

It has now become a very popular way to pay, but, as with any good idea, there are also a few disadvantages that consumers should be aware of, such as the risk of over-indebtedness.

Leonie van Pletzen, CEO of Micro Finance South Africa (MFSA), has called for proactive cooperation and expressed her concern about the rapid growth of Buy Now Pay Later (BNPL) products in South Africa.

She warned that without proper oversight and cooperation, these offerings could unintentionally contribute to higher levels of consumer indebtedness.

“While BNPL has been marketed as a convenient, interest-free payment option that can broaden access and support financial inclusion, there are risks if the products are left entirely outside of the established credit regulatory framework.

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Buy Now Pay Later has a place, but must be used wisely

“BNPL has a place in South Africa’s financial ecosystem, but like any form of credit, it must be transparent, responsible and sustainable.

“We want to work with all BNPL players to develop an industry code that protects consumers, supports retailers and ensures that this innovation strengthens and does not undermine consumers’ financial health.”

The MFSA’s key concerns include:

• Unrecorded debt exposure: Consumers may hold multiple BNPL accounts across different platforms, but these obligations are not always visible to other credit providers or credit bureaus.
• Consumer protection gaps: Unlike regulated credit under the National Credit Act (NCA), BNPL providers often have limited obligations for affordability checks or disclosure of risks.
• Systemic risk: A buildup of unmonitored BNPL debt could place strain on households, retailers and service providers.
• Global lessons: Regulators in the UK, US, and Australia are already strengthening rules around BNPL in response to rising defaults and consumer hardship.

“MFSA is advocating for BNPL products to be expressly included under the National Credit Act (NCA), with clear requirements for affordability assessments, credit bureau reporting and consumer disclosures.”

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Working together with Buy Now Pay Later is way forward

However, Van Pletzen stresses that collaboration is the way forward.

“We are not calling for restrictions that stifle innovation. Instead, we are inviting BNPL providers and regulators to work with us on an industry code that balances innovation with responsibility.

“This is our chance to set clear standards before challenges escalate, and to show that South Africa can lead with proactive, consumer-centred solutions.”

Meanwhile, Dean Hyde, Chief Operating Officer at PayJustNow, says South Africans are increasingly turning to flexible payment tools that help them align spending with income and avoid high-interest debt in the current difficult economic times.

“With living costs on the rise, now is the time to be thinking about how payment choices shape our financial well-being. The right payment method can give you breathing space and flexibility, but it should also help you avoid debt traps. The key is to match the payment to the purpose.”

Hyde has seen the growth of BNPL in his own company. Product adoption is growing quickly in South Africa, with Weaver Fintech’s financial results for the first half of 2025 showing more than 110 000 new consumer sign-ups per month into the PayJustNow platform and more than 100 000 short-term lending transactions taking place per month through the Finchoice digital platform. 

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Buy Now Play Later gives consumer more tools to pay

He believes that the rise of Buy Now Pay Later (BNPL), retail credit and short-term lending put more tools in consumers’ hands than ever before.

“Whether it is splitting a medical bill over three months, buying school uniforms over six months, or replacing an appliance over a year, flexibility matters.

“And when used intentionally, it supports better budgeting without compromising tomorrow for today.” Hyde offers this starter kit for making more intentional payment choices.

How to match your payment methods to your purchases:

• Day-to-day expenses: Predictable, low-value, recurring costs like groceries or fuel. Best paid immediately by debit card or cash to avoid costs piling up month-to-month.
• Essential expenses: Higher-value, non-negotiable items, such as school fees, home repairs, tyres or medical expenses. Interest-free BNPL instalments or short-term digital lending can help spread these costs, allowing you to remain within your monthly budget.
• Discretionary expenses: Lifestyle “wants”, such as luxury gadgets or holidays. Ideally, save and pay in full, but if you need flexibility, consider BNPL or retail credit instalments only if they fit comfortably within your monthly budget, factoring in terms, interest and fees.
• Emergency expenses: Urgent, unplanned costs, such as vet bills or car breakdowns. If savings are short, choose flexible payment tools with no penalties or interest, like BNPL.

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How to spend more intentionally

• The utility or lifespan of a product should always outlast the payment term.  Do not repay a skincare product over six months if it will only last you 3 months before it needs replacing.
• Check the total cost, not just the monthly one and review the fine print for hidden fees.
• Align payments with your cash flow. In other words, do not commit to payment tools that require you to pay instalments mid-month, if you pay on a monthly cycle at month end.
• Treat flexibility as a tool, not a temptation. Just because you can delay payment does not mean you should.
• Track open payment plans as you would your bank balance. After all, they are still commitments.