BNPL Surges as South African Debt Hits Record Highs

As the festive season promotions intensify across South Africa, the National Financial Ombud (NFO) has issued a warning for consumers to exercise extreme caution when considering Buy Now Pay Later arrangements. While these schemes are often presented as convenient, simple, and free of interest, the NFO highlighted that there are significant risks that are not immediately apparent to users. Interestingly, BNPL services have been shown in some surveys to increase impulsive spending by up to 25 percent compared to traditional credit cards.

Key Takeaways

• Rapid BNPL Growth Amid High Debt: Buy Now Pay Later services are expanding quickly in South Africa, particularly among younger consumers, despite households already carrying record-high debt levels.
• Regulatory Gaps Increase Risk: BNPL products are not covered by the National Credit Act, leaving consumers without essential protections such as affordability checks, cost disclosures, and dispute-resolution mechanisms.
• Prudent Consumer Practices Are Crucial: Individuals must carefully assess affordability, avoid stacking multiple BNPL deals, track payments diligently, and refrain from using BNPL for essential items to prevent financial strain.

Debt Levels Reach Unprecedented Heights

In a country where a large proportion of households are already facing heavy financial burdens, the NFO emphasised that these schemes can exacerbate existing debt pressures. According to the third quarter 2025 Debt Index published by DebtBusters, individuals entering debt counselling now allocate 70 cents of every rand earned solely to servicing existing debt. This represents the highest proportion of income committed to debt repayments since 2017. For South Africans earning approximately R35,000 per month, nearly 78 percent of their earnings are used to manage debt obligations, while for the most financially vulnerable earning R5,000 or less per month, this figure escalates dramatically to 92 percent.

Regulatory Gaps Leave Consumers Vulnerable

Buy Now Pay Later products fall outside the scope of the National Credit Act, meaning essential consumer protections are not enforced. These protections typically include mandatory affordability checks, clear disclosure of costs, and formal mechanisms for dispute resolution. Despite this regulatory vacuum, BNPL offerings are growing rapidly, leaving many consumers exposed to financial risk.

Demographics Driving BNPL Growth

A study conducted by TransUnion in the third quarter of 2025 identified that younger South Africans, specifically Gen Z and Millennials, are the demographic groups most likely to utilise Buy Now Pay Later services. This trend underscores the need for targeted education and awareness campaigns to help these consumers navigate the potential pitfalls of unregulated credit options.

Post-Festive Season Financial Strains

Patricia Temba, executive head of FNB Retail Collections, pointed out that once the festive season concludes, many consumers may struggle to meet their BNPL instalments. Missed payments often trigger escalating fees, potentially destabilising household budgets. What initially appears to be a convenient purchasing option can rapidly transform into a significant financial setback, particularly since the protections offered under the National Credit Act do not apply.

Maseti further explained that BNPL commitments are often layered on top of existing financial obligations such as loans, store accounts, and monthly household bills. Rather than reducing costs, BNPL arrangements simply defer payment, effectively creating additional debt at a time when many households are already stretched. Without the safeguard of formal affordability assessments, the risk of slipping into over-indebtedness increases sharply.

Warnings from Financial Institutions

MicroFinance South Africa has previously highlighted the dangers posed by the unregulated growth of BNPL credit services, noting that millions of South Africans are being exposed to unsustainable debt, hidden costs, and potential financial exploitation. The organisation has called on regulators to take urgent action to prevent widespread harm.

Maseti emphasised that many consumers mistakenly assume that BNPL products do not constitute genuine debt due to their ease of access. In reality, these arrangements can significantly impede the ability to maintain essential credit obligations, including mortgage payments, vehicle finance, and personal loans. The NFO expressed concern that unchecked BNPL growth could become a systemic driver of over-indebtedness.

Responsibility Lies with Consumers

Given that BNPL arrangements are not regulated under the National Credit Act, the onus for assessing affordability rests entirely with consumers. The NFO strongly advises individuals to carefully consider whether they will be able to meet instalment payments over the coming year without compromising other financial commitments.

Consumer Guidance for the Festive Season

To help South Africans safeguard their financial well-being and avoid excessive debt during 2026, the NFO recommends the following measures:

• Be honest about affordability: Consumers should thoroughly evaluate whether they can meet the full repayment schedule without affecting essential living expenses. Those already struggling with debt should avoid BNPL options entirely.
• Read and understand the terms: It is vital to know what consequences may arise from missing a payment, incurring late fees, or falling behind on instalments. Unclear terms should serve as a warning sign.
• Avoid taking multiple BNPL deals: Engaging in several BNPL agreements across different retailers can rapidly create unmanageable financial obligations.
• Do not use BNPL for essential items: It is advisable to refrain from using these schemes for necessities such as groceries, school supplies, transport, rent, and medical costs.
• Track payment dates carefully: Consumers should record all instalment obligations in a diary, budgeting application, or digital calendar to prevent missed payments during the high-pressure months of January and February.

Conclusion

The rapid rise of Buy Now Pay Later services in South Africa highlights both the convenience and the hidden risks of unregulated credit, particularly for households already burdened by high debt levels. With minimal consumer protections in place, BNPL can quickly escalate into unmanageable financial obligations if not approached responsibly. Experts and financial institutions urge consumers to carefully assess their ability to repay, avoid impulsive purchases, and track instalments diligently. By adopting prudent spending habits and understanding the true cost of BNPL arrangements, South Africans can enjoy the benefits of flexible payment options while safeguarding their financial stability during the festive season and beyond.