Openpay joins buy now, pay later race

AAP & Internet Retailing

20th Oct 2016

The buy now, pay later market is heating up with the soft launch of the Openpay app this week. Like competitors Afterpay and zipPay, Openpay lets customers split up the total cost of an item into several instalments, so they can pay for an item over time.

While the concept of buy now, pay later has been around for some time – it is essentially layby – the ability to make the process quick and seamless online or via mobile phone is new.

“Can you imagine signing a contract for [layby] at a fast moving fashion retailer? You need to be quick and seamless. The opportunity to open up [buy now, pay later] in new markets is huge,” Openpay CEO Simon Scalzo told Internet Retailing.

Around 200 retailers across the retail, automotive, home improvement and medical sectors in Australia currently let their customers pay with Openpay, including Anaconda, Shaver Shop, BMW dealerships and dental practices. Openpay also works with retailers in New Zealand.

Since June, around 40,000 customers have used the Openpay app, according to Scalzo. And nearly 70 per cent of customers reuse it after their first experience, he said.

“The opportunity is not slowing down at all. In my mind it’s not about competing with the other guys in the room,” Scalzo said. “It’s about the market being so significant that there’s opportunity for all of us.”

Senior analyst at Telsyte Steven Noble sees buy now, pay later options finding a foothold at checkout but not truly revolutionising retail. “Even in the High Street, layby is a marginal contributor [to sales], but that doesn’t mean it’s not a legitimate option. It comes down to the retailer, whether they should be offering it or not,” Noble told Internet Retailing.

Openpay relies on beacons to let customers know they can use the payment method as soon as they walk into a store that supports it. “It’s pretty pointless in my mind to ask the consumer at the point of sale if they want to pay over time,” Scalzo said. “They’ve already made the decision to pay, so it’s not the optimum point to talk to them about it.

“We’re really leveraging off the mobile phone in their hand to make them aware of [Openpay],” he said.

Customers with an Android phone or iPhone operating iOS10 receive a push notification to download Openpay. Once they provide their payment details, they can select their repayment terms and make a purchase.

Retailers receive the full payment – minus Openpay’s fee – the next day, while customers pay off the total amount over time. They can borrow up to $10,000 to buy goods or services with terms of up to 24 months.

Buy now, pay later providers claim the alternative payment option leads to higher sales at checkout, since customers can purchase big-ticket items right away, rather than having to save up first. This benefits retailers, but it could be risky for consumers.

“While [these payment options] deliver a fantastic interface and usability for consumers, people need to remember that the main reason they exist is so the merchant can get the sale earlier rather then wait for someone to save for that $2,000 guitar,” Josh Callaghan, general manager of wealth at financial services rating agency Canstar, told the AAP.

Scalzo said Openpay conducts instant credit checks on consumers who want to borrow over $1000 to ensure they can afford the loan. He also said the company does quite a bit of customer profiling to ensure it targets the right type of people. For instance, customers using Openpay to make purchases in the automotive or home improvement sector likely own their car and home.

Openpay has plans to join listed competitors Afterpay and zipMoney on the Australian share market next year, following an initial private capital raising of $8 million to $10 million currently under way.