Singapore fintech startup lands Kenyan ‘buy-now, pay-later’ client

Singapore-based fintech firm Finbots.AI has onboarded EDOMx – the entity behind the Kenyan buy-now, pay-later (BNPL) service, Faraja – to use its AI-driven credit modelling solution for improved creditworthiness assessments.

Faraja allows users of Kenya's mobile money platform, M-Pesa, to buy products immediately and defer payment to a later date. Transaction values can range from KES 20 (US$0.13) to KES 100,000 (US$666), with no interest and a 30-day repayment period. The service is offered at various merchants, such as Naivas supermarkets, Goodlife pharmacies, and the shoe retailer City Walk. it generates revenue by charging retailers a percentage commission on the item’s sale price. The incentive for retailers to adopt BNPL is the potential to boost sales, as consumers who might not have otherwise purchased items now have the financial flexibility to do so.

Finbots.AI says that its AI-driven CreditX credit modelling solution provides clients with clearer insight into potential borrowers' capacity to repay their loans. It does this by employing machine learning algorithms that leverage both traditional and alternative data sources. With this new solution, Finbots.AI believes Faraja can extend loans to a broader customer base while minimising risk.

Finbots.AI has provided its software to banks and fintech clients across Asia and beyond, including countries such as Cambodia, Brunei, Indonesia, India, and Australia. Recognising Africa's potential, the company appointed a Kenyan growth director for the region earlier this year. The BNPL sector has witnessed substantial growth in Kenya, spurred by the escalating adoption of digital payment methods and the proliferation of e-commerce platforms. In 2023, BNPL payments are projected to surge 23.2% year-on-year to hit US$1.056bn. From 2023 to 2028, these payments are forecasted to see a compound annual growth rate of 12.2%, reaching US$1.8bn by 2028. In addition to Faraja, other notable players in the industry include Lipa Later, Aspira, and Craft Silicon, each with their own variations of the core BNPL business model. 

A primary challenge for Kenya's BNPL industry is the risk of default, an issue Finbots.AI seeks to address with its software. Kenyans face a rising cost of living, with incomes not keeping pace with inflation. From June 2022 to June 2023, inflation averaged 8.7%, reaching a high of 9.6% in October 2022 – the steepest rise since 2017.

References

‘Kenya Buy Now Pay Later Business Report 2023’, ResearchAndMarkets.com, 17 March 2023

‘Buy now, pay later headwinds facing Safaricom’s Faraja’, Business Daily, 16 June 2023

‘Safaricom, EDOMx to offer Faraja buy now pay later service for Lipa Na M-PESA businesses’, Safaricom, 27 July 2023

‘Safaricom, Craft Silicon tap into the buy-now-pay-later trend’, TechCabal, 02 August 2023

‘How BNPL services can build a robust risk assessment process with Mono’, Mono, 18 August 2023

‘Aspira, Hotpoint unveil a 24-month ‘buy now, pay later’ plan for Kenyan shoppers’, Capita Business, 21 September 2023

‘EDOMx selects Singapore fintech FinbotsAI to scale Faraja BNPL business & drive financial inclusion with high accuracy AI-Powered credit decisioning’, Macau Business, 10 October 2023

‘Kenya’s cost of living crisis: expert unpacks what’s driving it and what should be done’, The Conversation, 16 October 2023

‘Frequently asked questions’, Lipa Later, Accessed 24 October 2023