By Charles Odogwu

Growing up, this writer was in awe of how people in the West bought electronic gadgets in instalments. He marvelled at how individuals whom you wouldn’t classify as rich got some of the most expensive cars and electronics on credit. He thought to himself why this was not the case in Nigeria. 

One sector that latched onto this model is real estate, albeit in a different way. We are all conversant with how real estate companies are effectively utilising the “minimum deposit” marketing gimmick to acquire customers who are given the comfort of spreading their balance over a year or more. Good as this initiative is, the drawback is that owning real estate is hardly within the reach of the greater part of the population. Not least when the country remains the World Poverty Capital. 

Enter fintech. 

Fintech has revolutionised the way of life of the everyday man. From its proliferation of banking solutions to the control it gives one over their finances, it has been nothing short of phenomenal. Banking solutions may have brought ease into the lives of Nigerians, however, what has engendered improvement in quality of life is the introduction of Buy Now, Pay Later (BNPL) platforms.

BNPL, simply put, are platforms that offer users access to credit to purchase items while they pay back in instalments over several months. BNPL platforms usually access the customer’s credit history and rating, one or more guarantors before providing either the funds or in cases where the selling platform offers the BNPL option, the desired item. 

The popularity of BNPL platforms is on the rise and who can fault Nigerians gravitating towards them in light of the harsh macroeconomic realities of the nation? One thing to note is that BNPL platforms may offer similar services, but they certainly go about it in distinct ways. Some merchants allow you to possess the product/good while you repay using a payment plan, while others require that you contribute a percentage of the item’s cost of purchase before releasing the goods to the customer. 

Regardless of their modus operandi, one section of the population benefiting from BNPL are the unbanked.  Historically, people within this category are often ignored, and at a time when mobile money and financial inclusion dominate public discourse around them, BNPL has been a breath of fresh air. The BNPL model offered by some merchants leverages data provided by this audience, notably information about where they work, their daily/monthly income and a guarantor whom they verify. This innovation has enabled many to have access to mobile gadgets that were hitherto out of their reach. 

And if you had thought for a minute, probably due to the national economic indicators pointing in the wrong direction, that BNPL was but a flash in the pan that will disappear in a couple of years, then it is best to know that that is no closer to happening than it was a couple of years ago. Players in this space are seeking and receiving huge funding to scale their operations and the trend looks not to be ending soon. 

Indeed, BNPL helps boost the purchasing power of users with the promise of repayment but what happens when repayment becomes a burden to bear? With the increase in the cost of living engendered by inflation among other factors, competing needs on limited resources and a general hatred towards repayment of debt, the number of delinquent customers in the BNPL space is on the rise and not every player has an effective system of getting them to uphold their part of the bargain. The conventional method of getting customers to pay is not effective for all and there is a risk that the ease of access to these funds could encourage some customers into taking more than what they are capable of repaying.

Although the CBN introduced the Global standing instruction (GSI) in August 2020, which was meant to help lenders automatically debit from any BVN-linked account, the rate of loan delinquents is still on the rise. Getting to utilise GSI may require getting a third party involved in the process and this may be a deterrent to some of the lenders. 

By and large, BNPL has changed lives in Nigeria and globally by providing the requisite credit to fund the cost of purchasing items of their choosing. Despite its downsides for both the lender and the customer, greater stakeholder collaboration is essential for the model to thrive while continuous engagement on the implication of default will be prioritised. BNPL works, and for it to continue to meet the needs of customers and expand into larger markets, everyone involved needs to be ready to play their parts. 

Charles Odogwu is a tech-enthusiast and a Sales Growth professional in the Fintech space. He writes from Lagos.