The Buy Now, Pay Later (BNPL) sector in Kenya, once hailed as a disruptive force in consumer finance, is facing a moment of reckoning. The recent collapse of Lipa Later, a prominent player that just months ago celebrated a significant $10 million funding injection, has sent shockwaves through the industry and cast a shadow over the standalone BNPL model. On March 24, 2025, Lipa Later was placed under administration, a stark reversal of fortune for a company founded in 2018 that had promised to democratize access to goods through installment payments.

Lipa Later’s demise, marked by unpaid salaries, legal battles with suppliers, and questions surrounding a seemingly imprudent acquisition of e-commerce platform Sky.Garden, hints at the inherent vulnerabilities of a business model reliant on continuous funding and efficient debt collection. While the BNPL concept, allowing consumers to purchase goods and pay over time, resonated with a significant portion of the Kenyan population, particularly those with limited access to traditional credit, Lipa Later’s inability to sustain its operations serves as an exemplary tale. The company’s struggle to secure further funding after a debt raise in late 2024 proved fatal, leaving it unable to meet its financial obligations.

Amidst this turbulence, a rival fintech firm, Craft Silicon, is positioning itself for acceleration. Known for its diverse suite of banking and financial software solutions, Craft Silicon ventured into the BNPL space with its product, Spotit, which launched a year ago and has already processed over Sh200 million ($1.5M) in transactions. This growth, particularly after its official launch with I&M Bank in mid-August 2024, suggests a different trajectory in a sector now viewed with increased skepticism.

Craft Silicon’s approach to BNPL differs significantly from the standalone model that ultimately failed Lipa Later. Spotit is embedded directly within the existing mobile banking apps of partner banks. This integration leverages the banks’ existing customer relationships, Know Your Customer (KYC) processes, and credit scoring mechanisms. According to Kamal Budhabatti, Group CEO at Craft Silicon, this pre-approval system ensures a smoother shopping experience. “Consumers can walk into any approved store knowing they have an available spending limit from their bank, making product financing more accessible than ever before,” he stated.

This bank-centric strategy addresses several limitations inherent in the standalone BNPL model, as articulated by Budhabatti. Traditional BNPL providers often rely on alternative data like M-Pesa transactions and ID validation, lacking the comprehensive financial history and direct relationship that banks possess. They also face the challenge of ensuring repayment to pay merchants, creating a potentially precarious cycle. ‘We are different [because]’ Craft Silicon’s model, by channeling lending through banks, integrates BNPL into the conventional lending pipeline, ensuring merchants receive payment the next day and potentially leading to lower Non-Performing Assets (NPAs), as claimed by the company.

The competitive landscape between Lipa Later and Craft Silicon was not without its tensions. Court documents from March 2024 reveal that Lipa Later accused a former Head of Partner Success Manager of breaching their employment contract by joining Craft Silicon and potentially utilizing Lipa Later’s confidential information. The executive, who moved to Craft Silicon as Head of Product, was alleged to have been involved in the launch of Spotit shortly after their departure. While Lipa Later’s application for a temporary injunction was ultimately dismissed due to insufficient evidence of direct involvement in product development or actual disclosure of trade secrets, the case shows the intense rivalry and the high stakes involved in the burgeoning fintech ecosystem. The accusation, though unproven, highlights the competitive pressures and the movement of talent within this rapidly evolving sector.

The broader BNPL market in Kenya, despite Lipa Later’s troubles, continues to show significant growth potential. Projections estimate a 13.6 percent annual increase, reaching a market value of US$1.18 billion in 2025. This expansion is fueled by consumer demand for flexible payment options and the increasing adoption of digital financial services. Other players in the market include Safaricom’s Faraja, M-Kopa, Tala, and Branch, each with their own distinct approaches. Safaricom’s Faraja offers interest-free credit, while M-Kopa initially focused on financing solar energy solutions and has expanded to various products targeting underbanked populations.

However, the rapid growth of BNPL has also attracted regulatory scrutiny. Earlier last year, Kenyan Members of Parliament urged the Central Bank of Kenya (CBK) to propose legislation granting it control over BNPL firms, signaling a growing concern about consumer protection and the potential for unregulated lending. Lipa Later’s collapse will likely amplify these calls for regulation, further shaping the future of the BNPL landscape.

Craft Silicon, with its bank-integrated model, appears to be navigating this evolving environment with a potentially more sustainable approach. By partnering with established financial institutions, Spotit leverages their infrastructure, regulatory compliance, and existing customer trust. This strategy could provide a crucial advantage as the BNPL sector faces increased scrutiny and calls for greater oversight.

Looking ahead, Craft Silicon has ambitious growth targets, projecting Sh3.8 billion in transactions by the end of 2025, based on internal projections and bank data. While the failure of Lipa Later serves as a stark reminder of the risks involved in the BNPL space, Craft Silicon’s differentiated model, focusing on collaboration with traditional banks, positions it as a contender for significant growth in a market still ripe for innovation. The coming year will be critical in determining whether Craft Silicon’s approach can indeed accelerate its growth and establish a more resilient foothold in the evolving Kenyan BNPL landscape, particularly as the sector grapples with questions of sustainability and regulation.