Navigating South Africa’s shifting consumer finance landscape

Weak economic growth, low investment levels, persistent unemployment and rising cost pressures are placing increasing strain on South African consumers, while traditional credit models historically have little insight into – or relief to offer – the informal end of the consumer market.

The result is a consumer with diminishing purchasing power in 2026, and a scenario that leaves many of the country’s major consumer-facing industries asking how to engage consumers in a way that best serves both sides.

Investec Equity Analysts Ross Krige and Keenon Choonoo examine the forces shaping this behaviour – and what it reveals about the state of the consumer economy.

A tale of two countries: Over-lent and under-banked

Broadly speaking, local economic data reflects a divide between formally employed households facing growing debt pressures and informal consumers and businesses that remain active but have limited access to traditional banking and credit.

South Africa’s consumer finance opportunity is, therefore, not simply about extending more credit, but rather developing a cohesive, inclusive understanding of consumers, as well as reducing friction in everyday transactions and building trusted platforms that can serve formal and informal markets.

Practically speaking, what does that look like? Investec’s equity analyst team recently set out to unpack this at their Consumer Finance Conference – hosted in Investec’s Cape Town offices in July and led by equity analysts Ross Krige and Keenon Choonoo.

“E-commerce, payments, value-added services (VAS) and alternative data are reshaping how businesses overcome or reduce that friction, create engagement and extend financial access, particularly across underserved consumer and informal-merchant markets,” explains Choonoo.  “The conference made it clear that the winners will not simply sell products or extend credit but aim to own the customers next default decision.”

Divergence and digitisation

The conference agenda featured seven guest speakers covering the spectrum of consumer credit, fintech, payment technologies, and informal markets. Led by Investec’s team, and from the data and in-depth presentations, several threads began to emerge, painting a picture of consumer stress, varying credit access, a cash economy with a digitisation opportunity, and the need for regulatory evolution.

Stressed and stretched, and needing to be served

According to Eighty20’s Ans Gerber, their Credit Stress Index indicates that the overall credit market has moved into a credit stress zone, with most consumer segments showing deterioration. PayInc data presented by Shergeran Naidoo shows that purchasing power is declining as inflation – especially administered pricing inflation – outpaces wage growth, forcing even the salaried few in SA to prioritise their spending on essentials.

This segment is also the “over-lent” corner of the market. Brian Makwaiba, CEO of Vuleka, argued that traditional lenders don’t understand the under-served, under-banked and inform market well enough. They found that lending herein is active but not formalised and default rates are actually only around 2%. Digitisation could be the key to unlocking this.

Another innovation in short-term financing that is making waves locally is Buy Now, Pay Later (BNPL) which Weaver Fintech’s Sean Wibberley says is increasingly the credit entry point for young consumers and a great acquisition tool for new customers.

Given this, future growth in South African consumer credit will likely require banks and lenders to use alternative data and more agile decisioning models to better assess affordability and risk in the informal or under-served market. Those that can do so successfully have a huge opportunity on their hands.

Smooth routes and trusted platforms

Cash remains a large part of South Africa’s economy, but if we follow the global trends seen in many other emerging markets, this will change – to the benefit of fintechs, as seen in Brazil, India, and more.

Digitisation and its role in reducing payment friction for everyday purchases offers a case study in how to bring underserved markets into the fold, increase value from existing customers, and get real, actionable data to inform innovative lending models. In this way, digitisation offers wins for both fintechs and traditional banks.

Regulatory change could be a helpful catalyst, and there is such change on the horizon, but timing remains the challenge as legislation promulgation moves slowly.

Finally, Anton van Zyl from Electrum told the conference that throughput in South Africa’s VAS market amounts to roughly R500 billion a year, underscoring the importance of understanding consumer behaviour and being the most convenient channel for everyday payments. These include airtime, electricity, bill payments, vouchers, gaming, sports betting, and shopping.

Convenience builds habits, they argue, and the institutions that become the default choice for frequent transactions can build significant trust, data and distribution advantages. Off the back of this, mobile banking apps are evolving into broader consumer platforms, while the boundaries between banks, retailers, mobile operators and fintechs continue to blur.

Alternative data, digital payments and updated regulation could narrow the gap between consumer demand and formal financial access. But with South African household finances still clearly under pressure, responsible lending and better risk assessment is a both business and social imperative.