Modern South Africa has a debt problem. By December 2022, household debt had breached 3 trillion Rand.
And yet for many South Africans, making certain purchases that many consider necessary – such as a phone, TV or household appliance – guarantees one thing: Credit debt.
Given the already high levels of debt, this is a precarious position. And it’s made more difficult by the complexities of securing debt in the first place. When it comes to evaluating individuals and companies for financial transactions, traditional credit checks have long been the go-to method. This means building a good credit score, but even that is a complicated, difficult, and opaque process.
At Rentoza, we think there’s a better, more inclusive way. That’s why we developed our own – non-credit – verification process for our product subscriptions, adding further innovation to an already innovative offering.
To explain why we’re convinced our way is better, let’s look at the key differences between credit checks in South Africa and how we do things.
Credit Checks in South Africa
Before we delve into Rentoza's unique approach, let's first understand the traditional method of credit checks in South Africa. This is built on a pretty big infrastructure – a web, really – of different institutions and industry players, some of which you’ll interact with directly, and others that work largely behind the scenes.
Here’s how it breaks down:
Credit Bureaus, Reports, and Scores
South Africa has several credit bureaus, such as TransUnion, Experian, and Compuscan, which collect and maintain credit information on individuals and businesses. These businesses gather and collate financial data for credit reports, which they provide to lenders and businesses, who rely on these bureaus to assess creditworthiness.
Credit bureaus assign credit scores to individuals and companies based on their credit histories. These scores are used by lenders to determine the risk associated with lending money or extending credit.
The primary method of presenting credit information is in credit reports. These include a range of financial data, such as payment history, outstanding debt, public records, and inquiries. This information helps lenders gauge the financial stability and responsibility of applicants.
The Problem
While on the face of it, the current system seems reasonable, it presents several problems and difficult hurdles, especially in a current like South Africa, where many face stiff financial challenges.
First, traditional credit checks primarily cater to established businesses and individuals with a substantial credit history. This approach can leave many emerging businesses and individuals without access to financing due to a lack of credit history. It’s the reason for a common piece of financial advice – that you should open accounts with stores, or take out long-term contracts, to improve your credit history.
Basically, you’re trying to show credit bureaus that you can handle debt, to try and convince them to give you credit. The obvious problem here is that the system requires you to accrue debt to be allowed to accrue more debt.
Here’s another problem: Each credit inquiry can have a slight negative impact on an individual's credit score. Multiple inquiries in a short period can potentially lower the credit score further. That’s right, even trying to find out what your current credit rating is, is considered a big no-no.
So while credit checks serve a valuable purpose in assessing creditworthiness, they can be a barrier for businesses that have yet to establish extensive credit histories or for individuals who are looking for alternative financing options. This is where Rentoza's verification process stands out.
Rentoza's Non-Credit Verification Process
At Rentoza, we understand that traditional credit checks may not always be suitable for emerging businesses and individuals. In fact, we think that traditional credit checks often cut out those who would most benefit from the access to the products we offer. That’s why our non-credit verification process is designed to bridge the gap and provide a more inclusive and flexible approach.
Here’s how we do it.
The Basics
When you subscribe to a Rentoza product, there are a few extra steps compared to a normal retail purchase:
- You’ll select the term of your subscription (anywhere from one to 24 months).
- You’ll capture your card information for your first months’ subscription – this card is used for all future payments, which happen on the same day as the first payment. An important point here: All Rentoza payments are card payments, not direct debits.
- You’ll be asked to confirm your delivery address and verify your identity. We wouldn’t want your new phone going to the wrong person, would we?
- Next, you’ll verify your bank account. This should be the account that your salary or wages get paid into.
- If you’re subscribing to a TV, you’ll need to submit a TV licence as well.
Now, that probably sounds a lot like a credit check. But the differences are important.
The Difference
Where a normal credit check uses a credit report and your credit score to decide whether you’ll be able to secure credit, at Rentoza we look at things through another lens.
We’ve developed our own model, one not based on credit history but on financial behaviour. What does that mean?
Well, instead of looking at your ability to accrue and service debt in the past, we look at how you use the money you have access to. Where a traditional credit check would punish you for not having used credit in the past, we understand that you might just be careful with your money. Why should you be punished for working with a budget?
Our approach is built around the idea that businesses and individuals may not have a substantial credit history, but have the capacity and determination to succeed. It’s why we analyse a wide range of data points.
It also makes us faster, and more efficient. Our non-credit verification process is streamlined to provide quick decisions. We understand that time is often of the essence when the fridge just broke and you need to make a plan.
Even better: Unlike traditional credit checks, Rentoza's verification process has no impact on an individual's credit score. So you can explore financing options without worrying about negative consequences for your credit profile.
Access a More Inclusive Future
While traditional credit checks continue to serve a crucial role in assessing creditworthiness, it's essential to recognise their limitations, especially when it comes to emerging businesses and individuals with limited credit histories. Rentoza's verification process offers an innovative and inclusive alternative, opening doors to opportunities for a more extensive range of applicants.
At Rentoza, we believe in the potential of businesses and individuals, and we're committed to providing flexible and tailored access to the products that can change lives. Because we understand that there’s more to financial responsibility than your ability to manage a credit card.
