BNPL – Buy Now, Pay Later – is how an increasing number of Gen Z and Millennials are paying for their goods.
See something you like? Buy it now with a small down payment, pay the rest off in small instalments. When a customer buys something using BNPL the service provider pays the merchant the full price immediately and assumes the credit risk.
The trend has been a goldmine for fintech companies in the space – PayPal, Amazon and Apple are all in on the concept and, closer to home, Australian company Afterpay was bought by Twitter founder Jack Dorsey’s Square in a $39 billion deal – the largest merger in Australian history.
Afterpay, Laybuy, ZIP, FlexiGroup/Humm, Openpay and LIHL are the most common BNPL platforms used in New Zealand.
BNPL has also attracted attention from regulators who see the dark-side of the trend – consumers getting into financial difficulties, encouraged by the ease of lending and merchants having to suck-up the fees the BNPL platforms charge, charges they are not able to pass on to the customer.
Ambitious Australian company BizPay has another sector in its sights.
BizPay is BNPL for businesses and hopes to become a leading B2B BNPL platform globally.
Its sophisticated technology aims to solve cash flow issues associated with paying business invoices.
If your business uses BizPay your invoices will be paid within 24 hours, minus a 2% fee, enabling you to free up their cash flow and use that money to grow and innovate.
BizPay says that using its services cuts out pesky paperwork and other time-intensive hurdles necessitated when dealing with conventional financial institutions and rival lenders – making it a win-win, especially for small to medium-sized businesses.
I talked to BizPay’s CEO David Price to find out more.
What differentiates Biz Pay from other BNPL services?
BizPay is a fast-growing Buy Now, Pay Later fintech operating in the B2B payments space. BizPay is led and advised by a team of experienced finance and technology professionals who are passionate about helping businesses of all shapes and sizes flow and realise their full potential. BizPay provides a compelling and cost-efficient value proposition to its clients with a substantial competitive advantage.
What is your presence in New Zealand at present and what future plans do you have?
David – We process transactions in several countries globally including New Zealand. Currently we have offices in Australia and the US as these markets are our primary focus.
Australia has just opened for business – how does BizPay help?
Opening for business after many months off, business needs to stock up on supplies upfront to get going. Many businesses have had little to no revenue for the last few months so where would this money come from? BizPay allows companies to buy the supplies they need now and pay over time. So this is a perfect time to use a service like BizPay. We’ve actually cut our fees in half for this back to business period which means we aren’t making a profit. We are doing this to help businesses get back on their feet. It’s how we at BizPay support the small business community.
You’re exclusively in the B2B sector – any plans to widen the scope?
No, the B2B market is larger than the B2C opportunity and there are far fewer competitors than B2C Buy Now, Pay Later. Our focus is to become the leading company in the B2B Buy Now, Pay Later globally which will take a long time.
How have the banks regarded services like BizPay – you’re direct competition aren’t you?
No, we are in discussions with major banks regarding partnerships. You could look at this cynically and say they were too slow on Buy Now, Pay Later on the B2C side so they don’t want to miss out this time and lose out in the same way as credit card usage was cannibalised by Buy Now, Pay Later.
However we see it differently. Buy Now, Pay Later on the consumer side focused on people that didn’t want credit cards. Our service is offered to people that also use multiple other banking and lending products. It is a complementary product.
Has Covid meant businesses are less timely with paying their invoices?
Yes. In Australia, even before COVID, a 30 day invoice was paid on average at 36 days. COVID lockdowns dramatically exacerbated cash flow issues. A high proportion of businesses were taken to the brink of insolvency or beyond.
BizPay has developed its own AI to decide on risk – can you talk a little about that?
We and our customers see us as a payment product, not credit. To occupy this space you cannot ask for a lot of financial information in the same way that credit products do. So our AI looks at alternative data points in the background and is able to take a lot of the burden off the customer.
Is it true that you take into account the amount of time a prospective customer spends looking at the terms and conditions?
Our AI is changing all the time and looks at whatever data points are most predictive. If a data point is predictive it will be retained in the model. Or, if it is not sufficiently predictive it will be dropped.
What’s it like being a relatively new start up in the time of Covid?
COVID has made more clients need or want BizPay and other Buy Now, Pay Later services so it’s been good for our growth. However, lockdowns have also put more businesses into hardship than other periods, so it’s a double edged sword.
Many think the SME lending sector needs to be regulated. What’s your view?
Yes, I agree it should be more regulated but within reason, and it shouldn’t get in the way of Buy Now, Pay Later providers empowering SME’s to better manage their business. There is an assumption by some regulators globally that Directors are more financially responsible or literate than the general public so they need less protection. That assumption might be true to a degree but Directors also need a level of protection.
David, how did you get into this space?
I was exposed to Buy Now, Pay Later through an extended family member who founded Zip. After a few years of seeing the model working, I realised there was an emerging industry wave that was worth riding.
You’re planning an IPO next year – with many companies staying private for longer – why the rush?
We don’t only need money to run our operations, like a Canva for example. As a fintech in the Buy Now, Pay Later space, our business is to advance finance so it is very capital intensive. These levels of money are not really accessible in the private markets in Australia.
Best advice for someone thinking of starting a fintech company?
To succeed you need an innovation that is substantial as your competitors are some of the largest institutions in the country. There is a lot of capital investment available right now for the right fintech ideas, and they take a lot of capital to launch. So I would say if you can’t raise capital in this market for a fintech startup take that as a sign you need to go back to the drawing board. Also crypto is clearly the next wave coming so look there.
