Credit conundrum

Posted by Flux on 

11 May 2022

What’s trending?
During this time of economic uncertainty, we’ve begun to see new credit offerings popping up in the personal finance space. Quick and easy credit has always existed but these are now becoming formalised and more socially acceptable. Retail store cards can now be used as credit cards. Payment gateway PayFast has partnered with RCS to provide stores with in-store-credit cards. The store cards work much like any credit or debit card does. In another development, many start-ups are now offering payday loans up to R8500. With Southern Finance for example, you can borrow up to R6000 with their quick and easy online payday loans. Once the loan has been approved the funds will be deposited within 24 hours.

Why is it important?
Buy Now Pay Later (BNPL) schemes are flourishing. A recent report from IBISWorld predicts the BNPL industry will grow by 9.8% annually over the next five years to $1.1 billion. This  suggests there is growing demand, the core market still being consumers of below average income. However, easier access to credit is a double-edged sword. Many are struggling financially but want to keep up their standard of living. These easy forms of credit will encourage more spending and eat into their savings. The mounting debt could eventually catch up with them. According to a survey by, nearly a third of BNPL users have struggled to keep up with their payments. 

What can businesses do about it?
Financial service companies need to consider how, or if, they will participate in the BNPL market. Retail companies could look into partnering with BNPL providers as an option for their customers. They could also investigate how to extend their store cards to a wider range of stores. Businesses could consider how to offer a form of payday loans for their employees’ emergencies but combine this with financial education to help staff make better financial decisions. 

By Faeeza Khan

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Image credit: Rawpixel

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