Buying something and receiving it now while paying it off later seems designed to be helpful: It lets consumers enjoy things before they pay for it and enables purchasing without the liquid cash, letting people pay it off down the road. But the buy now, pay later (BNPL) model is laced with limitations and opens the door to unsavoury outcomes for consumers and the economy overall.
The BNPL design locks consumers into owing money, and if this is spread across merchants and unregulated lenders, it can cripple the future finances of the consumers as they accumulate unsustainable debt that they can’t pay off. As it stands, the country’s consumer debt is already a problem and credit consumption doesn’t aid this. In the long-term, the South Africa Households Debt To Income is projected to trend around 75% in the next year with no signs of slowing down.
The credit system and “flexible payment options” in the BNPL model are also on the rise. With pay-later payment startups popping up to offer a new payments option and big industry hitters like Visa and Mastercard entering the scene, consumers feel spoiled with the choice to pay off their products at a later stage. While more players are in the space, the reality is that the options are quite similar and all lead to a similar concept: Money lending and money owing. With credit and lending, consumer behaviour often leans towards over-spending rather than saving. According to research, 55% of consumers say they tend to spend more using BNPL systems than they would be using any other payment method.
On the other side of the coin, securing something and paying it off in instalments to receive it once it’s fully paid for provides a long-term sustainable model for the health and wealth of the South African economy. The lay-by system, where one pays for one’s product over instalments and receives it only once the full price has been paid, encourages careful spending and promotes saving, leading to better consumer habits without slapping consumers with any extra costs or charged interest.
LayUp is designed to offer a real alternative payment solution. Instead of offering a BNPL model, the Save Now, Buy Later (SNBL) approach opens up access to a much wider consumer base who can put money aside and break up an otherwise unachievable total cost into simple instalments. With 0% interest-rate fees, consumers don’t need to go through any credit checks – alleviating a massive barrier to entry for a large population – and they are encouraged to spend their money with their future finances and goals in focus, protecting them from any unwarranted debt.
LayUp’s mission is to work towards building an inclusive economy where more people can enjoy alternative payment plans while practising healthy online spending behaviour. There are no late penalties for missed payments, no risks involved and no credit checks required.
LayUp offers millions of unbanked South African a credit-free way to save, opening up the market and access to consumers in a new way. Flexibility is a core part of LayUp’s offering – consumers are given a system to put money towards bigger payments without worrying about accumulating interest and they aren’t locked out of the money they put aside should they want or need to cancel.
LayUp works with only vetted companies that are legally bound to honour the lay-by contract, protecting consumers from interest rates and allowing them to save for a product their initial instalment secures. It’s a credit-free solution that is designed to keep consumers out of debt while allowing them to save towards a specific goal product. It alleviates reckless lending, careless spending, and unwarranted debt – truly a digital payment alternative to the BNPL model.