Buy Now Pay Later Player OpenPay Diversifies Revenue As Regulatory Headwinds Increase For Sector

Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a neowealth disruptor in Australia

Recently listed Australian fintech, OpenPay, has announced it has secured a flagship deal with one of Australia’s largest retailers, grocery giant Woolworths. The Buy Now, Pay Later (BNPL) platform will use the Woolworth’s deal to push forward growth plans for its new Openpay for Business product, which will allow Woolworth’s suppliers to more seamlessly interact with the large corporate when it comes to managing their trade account, from signing up to invoicing.

The launch of this platform represents an interesting strategic shift for a business that up until now, has been focused squarely on the BNPL space. Spread across the Australian and UK market, the company reported 206,434 active customers at the close of Q2 FY2020, jumping up from 151,948 in the prior quarter. It also saw a slight uptick in active merchants, growing from 1,694 to 1,894 over the same period. Year on year the business also increased its transaction volume, hitting AUD$84.4 million in December 2019, up 95% on 2018’s closing figures.

The new business line will deliver additional revenue to OpenPay, although just how much is not clear. The company’s latest published investor report demonstrated the business booked AUD$8.3 million in 2019, made up solely of merchant and customer fee revenue, a 73% increase on the prior year,

The fintech listed on the ASX just before Christmas, initially falling from its bullish issue price of $1.60 to close at $1.32 on its first day of trade. Like most freshly listed companies, it has had a bumpy ride since, however after the Woolworth’s announcement the stock was trading up on the prior day’s close at $1.24. No doubt it has room to move upwards with more deals of this ilk and continued strong growth in the core BNPL business.

The BNPL space is exciting, and growth prospects are solid both nationally and globally, but like any fast-growing industry, it doesn’t escape scrutiny. Merchants and consumer groups were reported this week to be calling on the sector and its major players to stop preventing merchants from surcharging to recover the costs of BNPL transactions. Data from UBS, published in the AFR showed the burgeoning transaction type attracts significantly more fees for merchants, sometimes up to 6 to 7 times the cost of traditional scheme debit.

While under the current law merchants can selectively recoup transaction costs on credit and debit cards via surcharging, many BNPL providers limit merchants, at a contractual level, from surcharging on a BNPL sale. It’s speculated by consumer groups that in order to recover costs, merchants must increases prices for goods across the board. They’re worried consumers who don’t choose BNPL payment types are potentially overpaying or subsidising those that choose BNPL.

It’s still early days as to how the regulator will ultimately respond to calls for more oversight into the sector, and BNPL businesses are expected to hold their ground, with solid arguments their networks deliver more customers to merchants overall through their platform approach, making them a different breed to traditional payment types. One thing is for sure – it doesn’t hurt to have a revenue back up plan. Perhaps that is what is on Openpay’s mind?

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