Buy now, pay later (BNPL) is a type of short-term financing that allows consumers to make purchases and pay for them over time, usually with no interest. These loans are also called Point-of-sale (POS) instalment loans.
With BNPL, you can make purchases and pay for them over time after an up-front payment. They typically charge no interest and are fairly easy to get approved for. They also don’t generally affect your credit score unless you make late payments or fail to pay.
African Startup, Float – allows credit card holders to use their existing credit to split purchases into flexible, interest-free monthly instalments. With payment periods of up to 24 months, this model is well suited to big-ticket purchases and, because it does not issue consumers with new credit, ensures that shoppers don’t overextend themselves
“When you use Float to make a purchase, your available credit is reduced by the full purchase amount, acting like a safety net to ensure that you don’t overspend. Float charges one interest-free instalment each month. Effectively, it simply breaks the purchase into manageable, monthly repayments on your credit card,” says Alex Forsyth-Thompson, CEO of fintech Float.
The monthly instalments allow you to spread payments across salary cycles. For instance, a R10,000 purchase split into six equal instalments means you pay around R1,667 per month over six months. The same purchase using a regular BNPL provider would typically require a payment of R2,500 every two weeks and your purchase would need to be fully settled within six weeks.
Since no new credit is being offered, there is no sign-up, registration, or credit check process for consumers. Float is also the only BNPL that does not levy late fees or penalties.
Forsyth-Thompson says, “With high living costs and interest rates, South Africans need to avoid any new credit issued without the usual affordability checks. The fact that BNPL loans don’t reflect in credit records is a concern that is compounded by how easy it is to accumulate multiple BNPL purchases. Small payments can add up quickly and this could end badly. What starts as a smart decision to spread out payments can quickly evolve into a financial burden.”
Regular BNPL services are interest-free, but late payment fees can be as high as 25% of the purchase within just a few weeks.
Testament to Float’s ability to facilitate bigger purchases, the average order value on Float is around R10,000 – almost ten times the average reported by regular BNPLs of just over R1,000. The top three categories for BNPL purchases using Float are electronics (29%), furniture and home decor (22%) and appliances and gadgets (19%).