As we headed into 2025, the stage seemed set for South Africa’s interest rates to drop, with inflation within the South African Reserve Bank’s (SARB) target range.
Regan Adams, CEO of RCS. Image supplied
However, global factors – including heightened geopolitical instability and tariff-related tensions – prompted SARB to hold firm. This interest rate stagnation has had both direct and indirect effects across the credit market.
At the higher-income end, households with home loans and vehicle finance remained exposed to significant debt servicing costs. Default rates on mortgages and car loans worsened year-on-year, reflecting the weight of these commitments in the absence of rate relief.
Meanwhile, in the mid- to lower-income segment – which is typically more inflation-sensitive than interest rate-sensitive – essential costs continued to rise, leading many to turn to credit as a coping mechanism.
Credit growth driven by existing users
While the overall number of credit-active consumers has not grown significantly, existing credit users with stable payment histories are being extended more credit.
Growth in the sector has therefore largely come from within the existing pool rather than from new entrants in the market.
The most notable growth has been in the card market, where both credit cards and store cards have seen an increased uptake.
This is particularly true among younger consumers, many of whom are entering the credit market through digital wallets and e-commerce platforms that require ‘tokenised’ or app-enabled payment options.
There has also been measurable growth in the personal loan segment, but here the picture is more nuanced. The growth has come predominantly from non-bank lenders offering shorter-term loans.
While this offers consumers more choice, it also introduces higher risk: delinquency rates in this segment are climbing, indicating emerging stress among those who are already under financial strain.
The unregulated rise of BNPL
One of the fastest-growing segments of the credit landscape is Buy-Now-Pay-Later (BNPL). While BNPL models promise convenience and interest-free instalments, many users fund repayments using traditional credit, including credit cards.
This creates a layered credit exposure that is not currently captured in any affordability assessments, as BNPL is not subject to the same reporting obligations as regulated credit products.
While BNPL products initially had relatively conservative limits, major BNPL providers today offer R20,000 to R30,000 limits – which is a substantial exposure for consumers.
Without transparency or oversight, this market is becoming a ‘black box’ of credit risk. As BNPL continues to grow, calls for regulation will intensify, especially as providers seek to cross-sell traditional credit products off the back of BNPL account relationships.
Gambling: a growing financial risk
Another area of concern is the escalating spending on gambling, particularly through digital platforms. Industry estimates suggest that gambling spend in South Africa has surpassed R1.1tn.
Much of this activity is driven by small, frequent bets that create the illusion of low risk, but often lead to addiction and long-term financial harm.
The ‘gamification’ of platforms, ease of access via mobile devices, and aggressive marketing tactics have made gambling particularly common among younger consumers.
There is also evidence that recent withdrawals from the two-pot retirement system have, in some cases, been directed towards gambling rather than debt repayment or savings.
As with BNPL, this growing area of consumer exposure remains largely unregulated and opaque, highlighting the need for stronger oversight.
Retail shifts drive new credit behaviours
Retail spend in South Africa remains under pressure. Consumers are prioritising groceries, fuel and other essentials over non-essential purchases.
While the broader retail environment remains subdued, e-commerce continues to expand, supported by innovations in last-mile delivery and rapid order fulfillment.
Traditional FMCG players are branching into new product categories and competing directly with established online marketplaces.
This transition to omnichannel retail is also shifting credit usage patterns. Credit is increasingly seen as an essential enabler of daily life, not just a tool for emergencies or big-ticket items.
This has important implications for how credit is designed, promoted and monitored.
Supporting responsible credit use
With credit playing a growing role in household survival, responsible lending and financial education have never been more important. In collaboration with Welltec, RCS continues to offer tools and resources that promote responsible credit use, including Credit Gateway – a platform that enables consumers to access a full credit report and score in under five minutes.
Grassroots organisations such as Fintr are also contributing meaningfully to financial inclusion by teaching children essential money management skills through interactive, game-based learning.
We are seeing early signs that these efforts are making a difference – particularly among younger credit users, who are becoming more conscious of their credit profiles and more informed about how to manage their debt.
What lies ahead for credit markets in 2025
Looking ahead, we expect the market to remain cautious. The SARB will likely take a conservative stance in the face of global uncertainty. Credit providers will continue to track inflation, interest rates and consumer sentiment closely.
We also expect more regulatory focus, not only in the BNPL space but possibly across all digital credit platforms. At the same time, innovation will continue to shape the sector.
AI and machine learning are already playing a larger role in credit scoring, fraud prevention and personalised pricing – and their influence will only deepen.
While the balance of 2025 may not bring dramatic relief, there are signs of stabilisation. Credit profiles are no longer worsening across the board, and responsible lending is opening space for cautious expansion. Our message to consumers remains the same: borrow wisely, pay down high-interest debt first, and use the free tools available.
If used responsibly, credit can offer opportunity and resilience in uncertain times.
