Safaricom and Craft Silicon target market share in the Kenyan BNPL market in 2023

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In Africa, the adoption of buy now pay later products is poised for accelerated growth over the next five years. Rising inflation and subsequent fall in disposable income have led many shoppers to turn to alternate financing sources like BNPL providers over the last 12 months. The market growth will be also driven by the higher number of unbanked and underbanked consumers across the region, who are turning to BNPL products to access credit and fund their daily purchases.

To tap into the high-growth segment, more and more firms are launching BNPL products through strategic collaborations and in-house development. The trend is especially higher in the Kenyan market, where the BNPL industry is projected to grow by 23.3% on an annual basis to reach US$1.05 billion in 2023, according to PayNXT360’s estimates. From 2023 to 2028, the industry is expected to grow at a compound annual growth rate (CAGR) of 12.2%, during which the gross merchandise value will reach US$1.8 billion by 2028.

• Safaricom, in July 2023, entered into a strategic collaboration with financial services firm EDOMx to launch the BNPL product Faraja. The BNPL service will provide over 32 million shoppers to make credit purchases from businesses on Lipa Na M-PESA. Like most BNPL services, the short-term loan is offered to consumers at a zero-fee, if repaid within a 30-day time.

Faraja has been under development for over a year and went live only after receiving approval from the Kenyan Central Bank. The BNPL service is expected to accelerate the revenue growth for Safaricom over the next five years, as the demand for credit products has been on the surge in Kenya over the last 12 months.

Craft Silicon is another firm that launched a BNPL product Spotlt in Kenya in H2 2023. Spotlt has been termed as Get Now Pay Later to differentiate it from those offered by competitors. Unlike Safaricom, Craft Silicon charges interest rates on short-term loans, which can be repaid over a period of six to twelve months. The interest rates, according to the firm, are comparable to or slightly lower than that of traditional banks.

To make the BNPL offering attractive, Spotlt enables consumers to credit virtual cards for international purchases and payments. Faraja, on the other hand, can only be used for domestic purchases. Furthermore, unlike other BNPL services, Spotlt gets integrated into the existing banking apps and is not a standalone service. This makes customer acquisition simpler for Craft Silicon. The strategy is similar to that of Safaricom, which has also integrated the BNPL offering into M-PESA.

• Craft Silicon has entered into a strategic collaboration with four banking partners, including NCBA. As part of the alliance, these banking firms will integrate Spotlt as a mini app, allowing users to make purchases using the BNPL service. Going forward, Craft Silicon is expected to partner with banking firms, as it seeks to accelerate customer acquisition.

Alongside banking partners, Craft Silicon has also forged alliances with nearly 40 to 50 merchants in Kenya. PayNXT360 expects the firm to onboard more merchants in Kenya over the next 12 months.

The launch of Faraja and Spotlt are expected to aid the financial inclusion in Kenya over the next three to four years, while also supporting the growth of the BNPL market from the short to medium-term perspective. The industry is also expected to become more competitive with the entry of Safaricom and Craft Silicon in Kenya. Up until now, the market has been long dominated by players like Lipa Later and Aspira.

Lipa Later has been seeking to expand its BNPL offering in Africa to further strengthen its foothold in the region in 2023. As a result, Lipa Later entered into a strategic collaboration with Mastercard in August 2023. Under the collaboration, the two firms will expand BNPL's offering and drive financial inclusion in Africa. Initially, Lipa Later and Mastercard are focusing on the Kenyan market, but plan to expand the BNPL offering in Rwanda, Uganda, and Nigeria from the short to medium-term perspective.

Aspira, in June 2023, entered into a strategic collaboration with Loexa Kenya. As part of the collaboration, Aspira will enable businesses to acquire vehicles without collateral or guarantors.

Amid the widening competitive landscape and market size, PayNXT360 expects more such strategic alliances in the segment in 2023. These strategic collaborations are, therefore, expected to play a pivotal role in the growth of the BNPL market across Africa over the next three to four years. With the market growing, PayNXT360 also expects venture capital and private equity funding to grow in the African market from the short to medium-term perspective.

To know more and gain a deeper understanding of the BNPL market in Kenya, click here.