South Africans hoping for some relief on borrowing costs in 2025 were left disappointed, as the South African Reserve Bank (SARB) kept interest rates on hold. The decision, driven by global headwinds – including heightened geopolitical tensions and tariff-related uncertainty –tightened the financial pressure on households and is reshaping how and why people rely on credit.
Heading into the year, the outlook for rate cuts seemed promising, with inflation sitting comfortably within SARB’s target range. But external instability prompted the bank to maintain its cautious stance.
According to Regan Adams, the chief executive of RCS, the impact of stagnant rates is being felt across the credit market in different ways.
“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,” says Adams.
Credit growth driven by existing users
Although the total number of credit-active consumers hasn’t increased significantly, credit growth is being fuelled by those already in the system.
“Growth in the sector has therefore largely come from within the existing pool rather than from new entrants in the market.”
The most notable uptick, Adams says, is in the card market, where credit and store cards are gaining traction.
“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’s also been measurable growth in the personal loan space, but Adams says this is more complex.
“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.”
Unregulated rise of BNPL
One of the fastest-growing areas in the credit landscape, says Adams, 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.”
Initially, BNPL limits were relatively modest. But today, leading providers are offering limits of R20 000 to R30 000 – significantly increasing consumers’ credit exposure.
“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
Rising gambling activity – particularly via digital platforms – is becoming a growing area of concern. Adams points to industry estimates showing that gambling spend in South Africa has exceeded R1.1 trillion.
“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.”
He says the “gamification” of platforms, easy access via mobile devices, and aggressive marketing have made gambling particularly prevalent 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 spending continues to face pressure, with consumers focusing their budgets on essentials such as groceries, fuel, and other necessities, rather than discretionary purchases. Despite this subdued environment, e-commerce is growing steadily, driven by advances in last-mile delivery and faster order fulfilment.
“Traditional FMCG players are branching into new product categories and competing directly with established online marketplaces,” says Adams.
This shift toward omnichannel retail is also reshaping how consumers use credit.
“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.”
What lies ahead for credit markets in 2025
Looking ahead, Adams says the credit market is expected 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.”
He also anticipates increased regulatory attention – not only in the BNPL space but potentially 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 remainder of 2025 may not deliver dramatic relief, Adams sees 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.”
