Sometimes, consumers want to buy products but cannot do so due to a lack of purchasing power. The World Bank reports that four in ten Nigerians live below the national poverty line. Only 17 per cent of Nigerian workers are employed in jobs that can help people get out of poverty. This figure indicates that a significant portion of the country’s population can’t afford many things they need.
More than ever, a consumer financing method known as Buy Now Pay Later is gaining traction in Nigeria and across the African continent as a convenient way to purchase commodities. BNPL offers a convenient way for customers to budget by matching their monthly income to their monthly expenses. In Nigeria, one of the pioneer companies championing this consumer financing method is CredPal – a company that allows consumers to buy anything across various online and offline merchants and pay for it in instalments at zero interest.
Founded by Fehintolu Olaogun in 2018, CredPal has over 85,000 active customers and more than 4,000 active merchants in this emerging but highly prospective BNPL industry. The BNPL payment adoption is expected to grow steadily over the forecast period, recording a CAGR of 20.4 per cent from 2021 to 2028. Its Gross Merchandise Value in the country is projected to increase from $ 204.3 million in 2020 to reach $ 1195.7 million by 2028.
In this interview with Ventures Africa, Olaogun talks about CredPal’s services and the future of the BNPL industry in Nigeria.
Kindly introduce yourself and tell us a bit about your background?
My name is Fehintolu Olaogun, and I am the CEO and Co-founder of CredPal. I have been an entrepreneur for almost half of my life, and I am very passionate about technology and using it to build solutions that can improve and change lives. Before CredPal, I co-founded other tech-enabled services targeted at solving the needs of businesses and consumers.
What influenced you to start CredPal?
The experience of wanting better opportunities but not being able to access them due to financial challenges is something young Nigerians find very relatable. I always say I would have started an incredible venture or achieved so much in life if my parents had been able to purchase a laptop for me earlier than they did. These are challenges that access to flexible financial opportunities like consumer credit could solve.
I met my co-founder, Olorunfemi Jegede, who owned an eCommerce store and experienced abandoned carts and shoppers sending requests to pay in instalments to manage the pressure of complete payment for the desired item. We both compared our financial and economic realities to that of developed countries, and it made us think, “why can’t we have a service in Africa that eases people’s purchase challenges?” That is how we began a business that we believe will have the greatest impact on Africans’ financial capabilities: consumer credit.
What was the reception like when you started?
The reception was overwhelmingly positive. It was better than we expected. Customers were eager to make purchases and split payments, and our partnered merchants loved it even more. It was an opportunity for merchants already experiencing abandoned carts and window shoppers to sell more. I remember we had merchants who gushed about how customers were constantly requesting an instalment payment plan to ease the financial strain of emptying their bank accounts. And here we were, offering that they could take these items home and use them while they paid back. It was a game-changer.
How do you go about strategic partnerships with merchants?
Our partnerships with merchants are driven by our goal to ensure that businesses using CredPal contribute to customers’ acquisition and experience an increase in transaction volume and sales. Because merchants serve as a vital distribution channel for us, we take an approach that focuses on the best way our solution can be advantageous to them. We liaise with high-growth merchants of all sizes, work with them on their path to expansion, and optimize solutions to achieve these goals.
With a population strength of over 200 million, why is the consumer credit culture in Nigeria still dragging?
A chunk of the Nigerian population is still unbanked and underserved, and consumer credit solutions are optimized for the digitally savvy consumer. To make this appealing to the unbanked, unlocking affordable financing and lowering the barriers to credit access is essential. This involves building credit products that solve their needs and educate them on appropriate credit use. As the access to consumer credit expands, the credit culture will grow and improve. It’s happening now. We have customers who pay even before their repayment is due just because more people are now aware of the benefits of timely repayment – the fact that credit can open the door to several opportunities across mortgages, car financing, and many more.
How do you manage defaults in your service?
The first step is to ensure we use the proper risk management measures to determine credit approval for customers who have established outstanding credit profiles, have good financial characters, and can pay. We’ve also built education into the product so well that once customers sign up on CredPal, we make them aware of their eligibility criteria and the factors involved in making this decision and then go ahead to educate them on the appropriate use of credit. This helps us manage defaults and protects consumers from taking on more credit than they can repay. With these, the risk of default reduces because customers can conveniently make repayments. I also believe that if lenders endeavour to make frequent and updated reports to credit bureaus, it will help lenders manage and assess risks when providing credit.
Nigeria ranks low among counties with the ease of doing business? What are the challenges you face in the course of rendering your service?
The main challenge is the lack of infrastructure to help lending businesses thrive in a developing economy, especially when it comes to credit reporting and documentation. There is still a lot of work for credit bureaus to do regarding credit histories and scores of consumers. Most of what we have access to is still largely unstructured; it makes it difficult to have sufficient information to determine customer eligibility when we’re offering credit.
How would you describe your impact since inception?
It’s been a tremendous experience to provide people with the opportunity to meet their needs without them worrying about their financial capacities. We’ve extended credit to first-time credit users who were able to make their first smartphone purchase through our BNPL offering; these types of instances have contributed to digital and financial inclusion for the average African consumer. When we launched four years ago, BNPL in Nigeria seemed like an unusual form of financing, but now, product adoption has gone beyond what we expected.
Several of our partnered merchants have gained a 40 per cent increase in sales and average order value. Our omnichannel merchant suite, CredPal Pay, serves retailers of all sizes and lowers buying hesitation of shoppers. We’ve been able to extend the product to several first-time credit users on CredPal, who have been able to build a credit profile and access higher credit opportunities. For us, it is a big deal. It has also been with so many learning experiences, and we realize that we are far from where we started. We keep creating and optimizing channels to level the playing field and make consumer credit easily accessible, whether at a brick and mortar store, eCommerce website or via the CredPal app.
What makes CredPal stand out from other BNPL companies?
First, what makes CredPal outstanding is our omnichannel merchant suite. CredPal pay was built to ease sales and accessibility for consumers. Our partnered merchants can offer BNPL to their customers online or in-store. We’ve created payment links, embedded plugins at the point of checkout on eCommerce stores, and provided QR codes. Our merchants can select from all of these when upselling BNPL to their customers online or in-store.
Our merchant partnerships are also unique. We partner with merchants across every industry, ranging from electronics, hospitality, and beauty to fashion, furniture, auto care, and several others. This ensures that consumers can use credit to support diverse aspects of their lifestyles.
Lastly, we foster financial and digital inclusion in the industry. We finance mobile phones and provide credit to first-time users through our BNPL product. This helps to promote digital inclusion and increase access to digital technology. Youth corpers, students, and farmers can purchase a phone or necessary gadget. Smartphone adoption is increasing, and the advantages of digital devices cannot be overstated. We are offering low, and middle-income earners a chance to purchase gadgets and pay back conveniently.
What is the future of BNPL in Nigeria, and what are the plans for CredPal?
There has been a shift in spending habits and the adoption of online shopping in the past few years. These changes are partly due to the rise of digital payment solutions, an increase in how retailers are embracing eCommerce, and the pandemic. This wasn’t the case just a while back but see how much growth BNPL has achieved.
In Africa and the Middle East, BNPL is set to reach over $79 billion in Gross Merchandise Value by 2028. Consumers are also adopting this new wave of credit because of its value proposition. With more consumers telling their favourite merchants to accept BNPL, this is an ecosystem that will continue to grow because of all the key players bound to benefit from it.
At CredPal, we plan to extend merchant partnerships while building more technology features to increase value for merchants and consumers. We will continue optimizing our omnichannel merchant suite to improve the ease of receiving payment through BNPL. Most importantly, we are looking to expand into other African countries. There are a lot of exciting plans, and we can’t wait to roll them out.