Australian buy now, pay later provider PayRight has raised over $30 million dollars in funding as it eyes international expansion and the deployment of a custom digital platform.
The vast majority of the funding has been generated in the last 12 months, led by corporate advisory firm Henslow in partnership with wealth manager Escala Partners, and underscores a booming local market.
In the past three years Australians using buy now, pay later services has jumped from 400,000 to 2 million, according to ASIC which has expressed several concerns with the model including the typically young users liable to incurring late fees. Last year there was close to a billion dollars in outstanding buy now, pay later balances.
However, the buy now, pay later market was buoyed by news last month they would, despite the regulator’s concerns, escape mandatory customer credit check requirements. The news was welcomed by established providers Afterpay, Zip Pay and FlexiGroup, which are thriving under the new business model.
How it works
Providers pay for consumers goods then collect repayments from them at a later date as well as late fees. In the case of Afterpay, for example, merchants receive upfront payments from Afterpay on behalf of consumers, typically around 95 per cent of the advertised price. Afterpay then collects repayments from consumers in four equal instalments every two week. Failure to repay incurs late fees – as high as 25 per cent – which accounts for 17.6 per cent of Afterpay’s income.
PayRight differs slightly because it targets buyers of bigger ticket items like home improvement, education, health and beauty; capitalising on a gap in the buy now, pay later market, according to the company’s founders. Currently the company says it has deals with over 1,000 merchants and 200 more are trying to join each month.
PayRight says it practices responsible lending and performs extensive identification and credit checks to ensure a customer’s repayment capability. The company pays merchants upfront and in full on the same day of purchases, then, like others, manages the customer’s repayments.
Co-founders and joint CEOs, Myles and Peirs Redwood, say overall the buy now, pay later space is a $300 billion addressable market.
“We are seeing an increasing societal trend for spreading the cost of purchases and living expenses – consumers are moving away from credit cards with high fees and embracing more cost effective services such as buy now, pay later,” Piers Redward said.
“We have also conducted extensive research around consumer spending patterns and the trend towards buy now, pay later as a form of payment rather than traditional payment methods such as cash and credit cards is on the rise – we expect that trend will continue into the future.”
PayRight is targeting $45 million in volume this financial year but believes it can eventually reach $200 million annually.