RCS, the consumer finance unit of BNP Paribas, has acquired South African virtual credit firm Mobicred for an undisclosed sum.
The move is aimed at attracting more business from younger South Africans looking for alternative forms of credit. And the move pushes RCS deeper into the eCommerce ecosystem. Both are imperative for RCS since younger consumers dominate online sales in South Africa and eCommerce has accelerated since the pandemic.
“Our acquisition of Mobicred enables us to better serve the needs of South African consumers who require a more diverse suite of credit solutions to help them access and manage their purchases,” said RCS CEO, Regan Adams. “The acquisition of Mobicred was the natural next step in RCS’s digital transformation strategy and complements our existing offering perfectly as we enable our customers to shift towards shopping across their chosen channels – be it in-store or online.”
Mobicred founder and CEO Jason Sive said the acquisition helps further Mobicred’s original mission to make credit more widely available.
“The business was founded on the idea that credit should be easily accessible in the online retail environment in the same way as it is available in the physical store environment,” Sive said. “Soon after launching the business, customer behaviour immediately validated the assumption that there was a demand for alternative payment types. And the rapid growth in customer base has helped the business achieve 70% year-on-year growth.”
Sive said Mobicred has landed in a sweet spot in South Africa, addressing the demand for alternative credit sources. He said more innovation is ahead with the combination of the two companies.
“Our integration into the RCS offering will allow us to get behind the drive towards making credit more accessible, user-friendly, and transparent. We will work together to introduce innovations that will transform the future of the credit environment in South Africa.”
Mobicred has secured roughly 4,000 online merchant relationships over the years, with names like Takealot, iStore, Incredible Connection, BidorBuy, Superbalist, Game, Hifi Corporation, and Sportsman’s Warehouse. Mobicred’s merchant network also includes the flower and gift delivery service NetFlorist and health and pharmacy brands, including Dischem, Clicks, and Wellness Warehouse.
Mobicred, founded in 2013, embraces the term “buy now, pay later” on its website (see image above). BNPL has gained enormous popularity as an alternative way to purchasing goods and increasingly services, particularly among younger consumers.
However, Mobicred is a BNPL outlier. It offers virtual credit, which differs in a number of ways from what most of us think of as BNPL.
The main difference is that Mobicred charges interest, around 17%, which Sive says is competitive in South Africa. Another difference is that in the pay in four model the first payment is usually at the time of purchase. Mobicred’s facility allows for the first payment to occur a month after purchase.
In fact, in my conversations with Sive over the past few years, he’s been a pretty firm critic of the wider BNPL space. He has pointed to its low margins as unsustainable. And he predicted that platforms would compete in a “race to the bottom” over merchant fees in order to secure those critical relationships.
Given how poorly some of the global, publicly-traded BNPLs like Affirm and ZipCo have performed recently, he may have been prescient. But in fairness, growth stocks across the board have taken a beating recently.