South African fintech Payflex has given the old-fashioned payment option of lay-by a digital makeover. By leveraging new payment technologies, the part-payment platform is aiming to provide consumers with more affordable access to credit and a dramatically improved user experience. 

But, there is a key difference between old-school lay-by programmes, and part-payment or buy now pay later (BNPL) platforms: Shoppers using the BNPL solution receive instant access to their purchase as they pay it off.

Paul Behrmann founder and CEO at part-payment platform Payflex, says BNPL has become the ‘lay-by of today’s generation as consumers demand speed, convenience, and transparency at checkout influenced by changing consumer needs as a result of the pandemic.

“We’re in the midst of a payment technology revolution as the purchasing process shifts dramatically towards instant and frictionless payments. And as shoppers, particularly millennials and Gen Z, look for more transparent, flexible ways to pay, BNPL has given lay-by a digital reboot that is designed for the omnichannel shopping era.”

A modern spin on a decades-old concept
Long before credit and debit cards existed, lay-by was an innovative solution that allowed consumers to secure items for purchase, pay smaller amounts over time, and then eventually take ownership of the item once fully paid for. 

The concept originated in the 1930’s during the Great Depression in the United States, when merchants needed a way to attract cash-strapped shoppers without any risk. They remained popular for decades, until the emergence of credit cards in 1950 became a more common alternative. 

Fast forward over five decades, lay-by is again finding itself in the spotlight. And thanks to technology, BNPL, A.K.A the modern version of lay-by, is proving to be a major competitive advantage for eCommerce merchants in the battle for market share. 

Greater spending control
Unlike traditional credit facilities, BNPL models give consumers flexibility by spreading payments evenly over a set period of time.

“This flexibility enables consumers to shop more frequently, boosting ecommerce sales with shoppers shopping with Payflex 5.5 times per quarter.  

Additionally, this enables shoppers to save costs where they would traditionally be charged interest by the traditional credit card model, with the BNPL solution allowing shopping without the burden of debt,” comments Behrmann. 

He says the demand for flexible payments is being driven by a young highly digitally-literate generation of consumers with digital-first preferences, many of whom saw their parents struggle with credit debt during 2008 and are now cautious about the fees and interest associated with credit card debt.

This is echoed by research from consumer spending data firm Cardify.ai, which found Gen Z and younger millennials account for more than 80% of BNPL transactions.

BNPL a global phenomenon
Behrmann says the surging adoption of BNPL is being seen globally, and this is evident in the data. 

The global BNPL market is projected to grow from $353 billion in 2020 to $680 billion in 2025

Similarly, it is estimated that the BNPL industry is expected to grow to 15 times its current size in the next few years to account for US$1 trillion of annual merchandising volume.

Australian BNPL giant Afterpay grew 130% last year, while Zip, who backs Payflex, also experienced significant growth with transaction volumes more than doubling to $1.22 billion over a year. 

Closer to home, Payflex grew from a shopper base of 2000 to 100 000 in a mere 12 months. In addition, its customer base grew from 70 merchants in 2019 to over 750 this year.

Only the beginning 
Behrmann says rapid shifts in consumer behaviour over the last year and the continued rise in eCommerce is fuelling a global demand for flexible payment options — particularly among younger generations who are growing increasingly weary of traditional credit offerings.

He says this means it is only  just the beginning of BNPL as it continues to change the shopping game for credit-averse consumers. 

“Consumers are expecting the option to pay at a frequency that works for them when they reach checkout in 2021, regardless of the channels on which they shop. 

“As such, We expect BNPL to become as ubiquitous as offering EFT or credit card payments at checkout as shoppers place increased value on payment flexibility without hidden fees and charges – as well as a highly convenient checkout process.”