If you’ve shopped online lately, chances are you’ll have seen the option to pay off your purchase over several instalments. It’s called Buy Now, Pay Later (BNPL), and it’s the fastest-growing payment method in the world right now.

For shoppers, BNPL offers the flexibility of spreading the cost of a purchase across three months interest-free, while receiving the goods immediately. Needless to say, South African shoppers love it: they get access to items and services they want or need, without breaking their budget or constraining their available resources.

What’s more, BNPL was designed so that it does not contribute to rising consumer debt, says Craig Newborn, the CEO of Cape Town-based fintech PayJustNow. In fact, it offers consumers a responsible alternative to credit, with no fees charged unless payments are missed, and helps a growing cohort of consumers build their own credit records.

This is particularly valuable for consumers with so-called ‘thin files’, who don’t have enough of a credit history to get credit from traditional lenders and who are typically charged higher interest rates. By actively lending to students, for example, PayJustNow offers them an easy and low-risk path into the credit market. In turn, young consumers can build a positive credit history and qualify for better interest rates.

“Shoppers use BNPL for a range of reasons. They want to be responsible with their finances, they like the convenience, or they simply don’t have a credit card,” said Newborn. “The model actually rewards good financial behaviour, because users must pay off one product before they can purchase another – and with each purchase, they build a better credit profile without the use of revolving credit”

PayJustNow vets consumers during the application process before providing credit to them, says Newborn. When a consumer applies for a BNPL facility, the system assesses them across several key factors: risk (should we lend to you?); affordability (can you pay us back?); fraud (are you who you say you are?); collections (how do we make it easy for you to pay?); and returns (how do we make sure you come back and use us again?)

For merchants, BNPL doesn’t just offer increased conversions: it also mitigates their risks, as their payment is guaranteed. PayJustNow assumes the full risk for the outstanding payments.

“This is the safest, most risk-free product that acts as a credit facility,” said Newborn. “We’re offering a way to build a credit profile for those who would otherwise be penalised with higher interest rates. A SACCRA membership allows us to report on consumer payment behaviour, giving consumers the benefit of an interest-free and fee-free payment option to make purchases, while they build a credit profile to benefit from more attractive interest rates if they ever require credit.”