Buy Now Pay Later (BNPL) is more than just a passing trend; it’s a significant financial leap forward, particularly in Africa, where traditional credit systems – or the lack thereof – often hinder access to the latest technology.
What is BNPL?
BNPL is an innovative short-term financing solution that is reshaping retail consumption. By allowing customers to acquire products and pay in instalments, this model transforms Africa’s financial landscape and becomes synonymous with the future of shopping for gadgets, especially smartphones.
The significance of BNPL in the region cannot be overstated. It has emerged as a cornerstone of financial inclusion, creating opportunities for consumers traditionally excluded from the formal credit market. The growth of the BNPL market is remarkable, with expectations for it to reach a staggering $3.98 trillion globally. For the smartphone BNPL sector, this financing solution promises increased accessibility to technology, boosting smartphone penetration across the continent.
Smartphone financing options are not just a convenience but a critical enabler of connectivity and digital empowerment. Integrating BNPL schemes in the smartphone industry resonates powerfully with a demographic eager for affordable smartphone plans but constrained by upfront costs. BNPL financing is the entry point for the unbanked or underbanked, offering a lifeline that aligns perfectly with the consumer’s financial agility. With deferred payment plans, individuals can spread out the cost of expensive gadgets, making the dream of owning a smartphone a feasible reality without immediate financial strain.
These flexible phone instalment plans create a future where everyone can enjoy the benefits of the digital world, courtesy of the transformative value of mobile phones. Access to affordable smartphones is not just about owning a device; it’s about unlocking opportunities, connecting communities, and nurturing the continent’s digital economy.
The Current State of Smartphone Affordability in Africa
While recognizing the power of the smartphone BNPL revolution, the reality of smartphone affordability in Africa starkly contrasts this growing digital wave. The smartphone market in Africa shows resilience and growth, with shipments of 17.9 million units in Q3 2023, marking a 12 percent year-over-year increase. Yet, even as brands like Transsion, Samsung, Xiaomi, and OPPO make headway with substantial market shares, an undeniable affordability gap remains to be bridged.
However, while nearly half of the global population now has access to a smartphone, the high cost of devices continues to hinder their adoption in some communities. This, combined with prohibitive taxes, customs duties, and infrastructural challenges, further escalates the dilemma for potential smartphone buyers.
The Kenyan market typifies this scenario, where taxation measures and supply shortages lead to a spike in prices and an absence in availability, creating a precarious situation for vendors and consumers.
As an industry, it’s imperative to confront these socioeconomic obstacles. For instance, the new import tax adjustment by the Kenyan Revenue Authority, which requires payment based on transaction value, has steepened the uphill battle for feasible smartphone attainment. Furthermore, logistic issues such as delayed customs clearance and heightened security concerns exacerbate the supply problem, all adding to the affordability gap.
Nevertheless, the potential for growth remains promising, as evidenced by GSMA’s forecast that connections via smartphones will double in Africa by 2025. This optimism fuels the necessity to expand smartphone BNPL and phone instalment plans, seeing them as critical not just to technological accessibility but also economic empowerment.
The goal of enabling affordable smartphones transcends mere commerce. It’s about pioneering change, embracing low-cost smartphone plans, and premium technology a mainstay for every African household.
Case Studies: Success Stories of BNPL in the Smartphone Industry
BNPL models have the power to transform consumer finance, and we’ve witnessed some ground-breaking success stories across the African continent. Ventures like Keza Africa have emerged as prime examples by offering tech-savvy African consumers the option to finance smartphones through payment plans that span approximately six months. This innovative approach demonstrates how deferred payment plans are a game-changer for the industry.
CDcare stands as another example of progress, illustrating the potential of BNPL platforms to enhance lives. Through its intelligent instalment plans at zero interest, customers can own gadgets, appliances, and even cars. Meanwhile, Zilla’s strategy in Nigeria, requiring a mere 25% initial deposit and providing an eight-week payback period, further showcases the flexibility and adaptability of phone financing options.
Platforms like Lipa Later and Payflex are empowering even more Africans. Lipa Later, a pioneering Kenyan BNPL startup, has set a robust credit limit of KSh 500,000, conquering barriers to financial inclusion with 12-month payment plans. Conversely, Payflex in South Africa caters to those seeking immediate gratification, providing opportunities to purchase gadgets over a six-week term with no incurred interest.
Key players across the continent have resonated with the philosophy of democratizing technology:
- Payflex, South Africa: Interest-free payments over six weeks, maximizing the affordability of smartphones.
- Lipa Later, Kenya: Offers a substantial credit limit, amplifying the reach of smartphone financing options.
- Credpal, Nigeria & Sympl, Egypt: Localized BNPL services attuned to the financial landscapes of their respective markets.
These regional success stories underpin the opportunity for a seismic shift in smartphone financing options across Africa.
The Path Forward: Why the Smartphone Industry Must Embrace BNPL
Seamless integration of BNPL services in the smartphone industry is critical to the future of commerce and consumer empowerment in Africa. As the digital economy expands, with over 50% of transactions anticipated to be processed through digital and mobile wallets by 2024, embracing BNPL solutions is not just an option, but essential for telecom businesses seeking longevity and sustained growth.
Encouraging the shift towards smartphone BNPL models can drive revenue growth, elevate customer experiences, and streamline business operations. Notably, BNPL has the potential to harness powerful consumer insights, including preferences in phone financing options that can pivot sales strategies to meet market demands better.
Partnering with BNPL providers offers retail businesses, including smartphone vendors, the ability to glean these insights and craft more efficient credit vetting criteria and effective re-marketing strategies. This harmonious collaboration between smartphone financing options and BNPL services fosters an adaptive sales environment and cultivates a scenario where affordability meets convenience.
Specific advantages that underscore the need for the smartphone industry to embrace BNPL fully include:
- Revenue Growth: BNPL solutions convert more browsers into buyers, increasing checkout metrics and customer acquisition, with consumers more likely to complete a purchase when offered flexible payment options.
- Enhanced Customer Experience: Providing BNPL financing maintains competitiveness and addresses a pain point for many consumers—upfront costs—with a convenient payment method.
- Reduced Costs: While BNPL providers’ fees may be higher, the overall cost reductions from increased sales and customer loyalty make it a profitable long-term strategy for merchants.
- Data-Driven Insights: The data exhaust from BNPL transactions reveals intricate consumer behaviors—data on customer segments and shopping habits—that can be leveraged to fine-tune newly established credit scoring, product offerings and experiences.
Models such as embedded BNPL are tailored to various economies and demographics, ensuring goods and services, including smartphones, are affordable within consumers’ current shopping experiences. This appeal is especially poignant among Gen Z and millennial consumers, who prioritize financial management assistance and enjoy the purchasing power afforded by BNPL schemes.
Ultimately, the biggest prize offered by BNPL is its ability to help ‘connect the next billion’.
The BNPL services revolution within Africa’s smartphone industry suggests the beginning of a new era of financial inclusivity and technological empowerment. By embracing BNPL, the smartphone industry is responding to an evolving marketplace and championing a future where financial barriers are removed, enabling more comprehensive access to technology.
Affordable smartphone plans, powered by the ingenuity of BNPL financing, are crucial to unlocking endless possibilities for Africa’s global integration and socio-economic advancement.
