How Does Buy Now, Pay Later Work?

Buy now, pay later (BNPL) lets a customer take goods or services immediately and pay for them in a series of instalments, typically interest-free. The merchant is paid upfront by the BNPL provider, the customer repays the provider over the agreed schedule, and the provider earns its revenue mainly from merchant fees.

In South Africa, BNPL is offered at checkout by providers such as Payflex, PayJustNow and Happy Pay, among others. It has become a common option in online retail, particularly for fashion, homeware and electronics, and is increasingly available in-store as well.

How Does a BNPL Purchase Work?

1. The customer selects the BNPL option at checkout.
2. The provider runs a quick affordability and risk check, usually in seconds.
3. If approved, the customer pays the first instalment immediately.
4. The merchant is paid the full purchase amount (less the provider's fee) and fulfils the order as normal.
5. The customer pays the remaining instalments to the provider on the agreed dates, typically collected from their card.

The exact split varies by provider — a common pattern is a purchase divided into a small number of equal, interest-free instalments over a few weeks or months.

Who Carries the Risk and Who Pays?

Two points matter most for merchants:

• You are paid upfront. Once the provider approves the transaction, the customer's ability to pay future instalments is the provider's problem, not yours.
• You pay for that certainty. BNPL merchant fees are typically higher than standard card acquiring fees, because the provider is funding the instalments and absorbing defaults. Confirm the actual rate with each provider rather than assuming.

Ordinary returns and disputes still follow your normal policies — BNPL shifts credit risk, not product risk.

Is BNPL Regulated in South Africa?

BNPL products are generally structured to fall outside the National Credit Act (NCA), most commonly by keeping instalment plans short and interest-free, since the NCA's definition of a credit agreement hinges on charging interest or fees for deferred payment. This structure is why providers can approve customers in seconds without full NCA credit assessments.

Merchants should be aware that:

• Regulatory treatment of BNPL is an active topic in South Africa and may evolve.
• Providers, not merchants, are responsible for how their product is structured relative to the NCA.
• Responsible presentation still matters — describe BNPL accurately at checkout and avoid implying it is free money.

Should You Offer BNPL?

BNPL tends to make sense when:

• Your average order value is high enough that splitting payments meaningfully helps customers.
• Your margins can absorb a higher per-transaction fee in exchange for conversion gains.
• Your customer base skews toward shoppers who budget purchase-by-purchase rather than using credit cards.

It is less compelling for very low-value transactions, where the fee is hard to justify, or where your customers already convert well on other methods. Weigh it as part of your overall checkout mix — see How Do You Choose Payment Methods?.

Tips

• Compare at least two providers on fees, settlement timing and checkout experience before integrating.
• Display instalment amounts on product pages, not just at checkout, since that is where BNPL influences the buying decision.
• Reconcile BNPL settlements separately, as the provider pays you net of fees.
• Agree the refund process with the provider upfront: refunds usually flow back through the provider, which adjusts the customer's instalment plan.
• Monitor your blended cost of acceptance as BNPL volume grows.

Related Topics

• Other Payment Methods
• How Do You Choose Payment Methods?
• How Do You Accept Payments Online?
• What Are Recurring Card Payments (CIT and MIT)?