South African fintech startup Happy Pay has raised R32 million ($1.8 million) in pre-seed funding to scale its Buy Now, Pay Later (BNPL) services.

The funding round was co-led by E4E Africa and 4Di Capital, with additional participation from DotExe Ventures, Launch Africa, Equitable Ventures, Felix Strategic Investment, U.S.-based Gaingels, and several local angel investors. Fin Africa, a credit, savings, and insurance provider, also backs Happy Pay’s debt facility.

With the capital injection, Happy Pay aims to introduce new products, enhance its marketing efforts, and expand its merchant base across South Africa. The company will also focus on strategically growing its team to sustain efficient and scalable operations.

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Wesley Billett, co-founder and CEO of Happy Pay, expressed his enthusiasm about the funding:

“This investment will fast-track our growth and allow us to broaden our innovative product offerings, ultimately delivering greater value to both customers and merchants.”

Happy Pay’s Rapid Growth and Innovation

Launched in 2023, Happy Pay has quickly become a leading BNPL platform, offering users an interest-free and deposit-free credit solution. With over 150,000 active users, Happy Pay uses AI-driven credit scoring technology to assess customer affordability within seconds, ensuring a frictionless checkout experience while reducing costs for both consumers and merchants.

The platform has seen a 900% surge in user growth in just one year, driven primarily by South Africa’s millennial and Gen Z population, who favour BNPL options over traditional credit cards. Patrick Postrehovsky, co-founder and COO, emphasised the fintech’s role in driving eCommerce growth by providing merchants access to new customers, higher average order values, and improved conversion rates.

“We are enabling South Africans to access zero-cost alternatives to high-interest credit while allowing them to use their affordability data to engage with the formal financial system,” Postrehovsky added.

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A Booming BNPL Market in South Africa

South Africa’s BNPL market has seen a significant uptick, fueled by the country’s large population of financially underserved consumers, rising eCommerce activity, and the challenging economic environment. BNPL payments are projected to reach $1.07 billion this year, with a 10.6% annual growth rate expected from 2024 to 2029, bringing the market value to $1.78 billion.

Happy Pay’s growth comes as competition in the BNPL sector intensifies. Key competitors in the market include PayJustNow, Payflex, and Float. The latter raised $11 million earlier this year to launch a card-linked instalment platform and support its growth over the next four years.