Over the past three years, HomeChoice International – traditionally a retailer in the home space – has successfully pivoted out of a declining retail environment to a point where 95% of the company’s interim profits come from its fintech division.

The company saw a 25% growth in operating profit in the six months to 30 June 2023, despite a disappointing performance in the retail business which was restricted by credit risk tightening and market challenges. 

In July, Stats SA reported a 1.4% year-on-year decline in retail sales in May, marking the sixth consecutive month of annual decline in sales volumes.

While the company’s retail sales were down 25.6% year on year, finance and other income moved up 5% on the back of interest rate increases over the past six months. However, the shining jewels in HomeChoice’s crown are undoubtedly Weaver Fintech and its buy-now-pay-later arm, PayJustNow. 

Weaver Fintech delivered a strong performance, with revenue up 29% to R872-million and operating profit up 44% to R295-million.

The Weaver Fintech division offers personal loans and insurance products digitally through insurance FinChoice, as well as digital payment solutions through PayJustNow.

In the first half of the 2023 financial year, the group disbursed R2.4-billion worth of loans and channelled R544-million worth of retail sales via PayJustNow.

Weaver Fintech has successfully grown its customer base six-fold since 2019 to 1.2 million, of which 97% are digitally engaged. Management says increased scale, high levels of repeat business and a larger share of wallet-per-customer are also delivering increasingly more profitable growth.

FinChoice’s MobiMoney digital wallet has paid out R4.8-billion since inception and now offers bill payments at 25,000 Zapper points of presence. The product is clearly paying off, with fee income accounting for 33% of Weaver Fintech’s revenue. Funeral and personal accident insurance grew by 29% year-on-year.

PayJustNow (PJN) is one of the more successful buy-now-pay-later models in the market, and unlike competitors that have copied an international model of taking payments every two weeks, PJN offers a three-payment model designed to fit in with monthly salary payments. 

The stressed South African consumer has responded well, with more than 900,000 customers in just over two years, and a 43% increase in the number of transactions in the six months to the end of June.

Other players in the BNPL market include Payflex, TymeBank and Mobicred. According to Ken Research, the South African BNPL market is expected to grow at a compound annual rate of 35% between now and 2027.

TDMC, a digital agency that has launched more than 200 e-commerce stores, says integrating BNPL payment options on their Shopify-driven sites has proven to be an essential part of their suggested strategy. The agency reports that more than 50% of their retail clients had opted to integrate PayJustNow as an additional payment platform alongside their usual channels.

“We see incorporating a BNPL solution as benefiting both consumers and retailers – retailers are able to cast their consumer net further than before, and since the credit parameters are far less repressive than traditional banking institutions, in turn, their basket values are rising,” says Cheryl Ingram, founder of TDMC.

“BNPL mechanisms also mean fewer consumers are being pushed into a debt trap – we think this payment option contributes to more responsible lending which is especially relevant in the South African retail landscape.” 

The rolling blackouts impact

On the retail side, management attributes the 26% decline in sales to rolling blackouts and disrupted catalogue distribution after the collapse of the South African Post Office – along with a constrained consumer and lower availability of credit.

In light of the current economic environment, both Weaver Fintech and the retail division have tightened credit risk criteria and maintained prudent provision coverage. 

Craig Newborn, chief executive of PayJustNow, says the reduced acceptance criteria means the company has moved from accepting around 83% of applications to only accepting 67% of applications.

The group has successfully increased its funding facilities to R3-billion and currently has R1.6-billion in cash and undrawn funding facilities to fund the continuing growth of Weaver Fintech.

Executive chair Shirley Maltz commented: “We are pleased with our financial performance in the tough macro environment. The benefits of our digital-first strategy are evident in our strong fintech performance. 

“We are excited by the tremendous potential that exists to broaden the Weaver Fintech product range across lending, payments and insurance, and the good momentum that is building in our cross-selling efforts within the sizeable fintech customer base. 

“We have the vision as well as the funding to drive our growth ambitions.” DM