Question
What is the ruling with regards to Payflex?
About Payflex:
Payflex is an innovative eCommerce payment solution that can help online retailers make more sales. It enables consumers to break up the cost of their purchase into four payments. They receive their goods upfront, but they are able to pay for it in instalments every two weeks, at no additional cost to them. It’s a free spending plan.
Here’s how it works:
Let’s say a customer wants to buy an item costing R2000 from your online store. Instead of paying for the item in full upfront, they have the choice of using Payflex when they check out.
Payflex allows them to split the cost of the purchase up into 4 equal, interest- and fee-free payments. When checking out the customer completes a quick form and is instantly vetted. Upon approval, they then pay the first 25% of their purchase (R500) as a deposit, using their credit or debit card.
Payflex then collects the other 75% in three instalments of R500 each over the next six weeks.
But don’t worry – you’re not left waiting to be paid. Payflex will pay you for the sale upfront (less their commission). So even though your customers have a long time to for pay it in full, you will receive the money for the purchase up front.
Answer
PayFlex is mentioned below as an example among many different BNPL (Buy Now, Pay Later) service providers.
For the Customer:
These services vary significantly from one company to another. Some charge customers a monthly fee, which may depend on their account balance or activity. Others charge the customer a percentage of the sale amount for longer-term payment plans, irrespective of whether payments are made on time or not. In these cases, it will not be permissible to use such services, as they constitute Riba (interest).
If the BNPL provider’s terms are essentially the same as those of credit card companies, then the same rulings would apply— meaning that it would be permissible in cases of need when there is an interest free settlement option, provided the person in question is confident they will not miss any payments. It then follows that if there is no need to utilise such services, it will not be permissible to do so, just as the ruling is for a credit card.
For the Merchant:
If you, as the merchant, are charged a processing fee or a commission per transaction in order to offer these BNPL services; that would not, in itself, make it impermissible for a merchant to provide these services.
If a BNPL service operates in any other way, the ruling might differ.
Checked and Approved By:
Mufti Muhammed Saeed Motara Saheb D.B.