BUY NOW, PAY LATER?
Issue # 66
BEYOND PAYMENTS?
The Millennials and Zoomers seem to have a more conservative attitude when it comes to credit. They prefer debit cards to credit cards and now are powering the rise of the buy now, pay later (BNPL) segment. In Sweden and Germany as much as 60% of online transactions are paid via BNPL platforms. In the US, UK and Australia it is still under 50%, but growing fast.
What is BNPL?
Buy now, pay later plans allow consumers to make purchases and pay for them in several installments. Credit cards also let consumers pay over time, but the only required payment is the monthly minimum payment due, which can result in balances and interest charges accumulating over time. Unlike credit cards, BNPL plans often charge no interest and offer payment flexibility. BNPL providers make money from the transaction fees they charge retailers or by the discount at which they purchase the receivables, it is similar to factoring loans.
Win-Win-Win?
From the Guardian, “for retailers, the lure of BNPL is simple: customers spend more. It increases the basket size and it also reduces dropped baskets, said an investor in a BNPL startup”.
From the Fintech company’s perspective, my portfolio company Kueski reports that BNPL increases crossover marketing opportunities. Customers who use the Kueski BNPL platform also use the earned income platform or the Kueski loans platform about 50% of the time. That increases the lifetime value of the customer and helps improve internal credit models.
From Alex Lazarow of Forbes “customers benefit from a clear, simple and transparent check-out process and loan product. They also offer payment flexibility. One of the key challenges for many customers in the US and around the world is not necessarily a lack of capital, but liquidity crunches – not having the capital at the right time. Installment loans allow customers to manage this, and also pay something back over the course of their enjoyment period”.
BNPL is here to stay.
SYNDICATE OPPORTUNITY:
As you may recall, I syndicated an investment in the Series A round of Kueski, Inc. at a $24 million post-money valuation in 2016. I can’t share the current valuation publicly, but the company and its valuation have both grown dramatically.
To fund their continued growth trajectory, Kueski launched a $100mm Series C and I syndicated $100k of my pro-rata. Kueski's Series C and my syndicate were both oversubscribed. Thus, the company is going to expand their Series C round slightly to accommodate investors, enabling me to increase my syndicate from $100k to $150k (i.e. $25k of additional capacity remains).
If you would like to participate in the Kueski Series C Syndicate follow the link, here. Timing and capacity are limited, thus the syndicate will only remain open until Sunday.
NOTE: The above investment opportunity is limited to accredited investors and you will need to login to Angel List to participate. Angel List will require that you self-certify that you are an accredited investor. Only invest what you can afford to lose.
CITIBIKES:
It’s been a busy couple of weeks for me as I have been traveling around the United States. Last week I stopped in New York City, which was fantastic. New York is definitely back, people are everywhere, restaurants are full and the sidewalks are jammed. It was great to see old friends and to meet new ones.
Getting around NYC has become much simpler with the rise of Citibikes, which is managed by Lyft. Venture Capitalist Fred Wilson wrote about how E-Bikes are improving commutes and the quality of life in a recent blog post, here.
My friend Sharam Honari told me about the Citibikes and highly recommended them. I was skeptical, but I picked up a Citibank in Chelsea and rode it to the World Trade Center, it took me about 15 minutes, the entire ride was in a separate bike lane along the Hudson River. The redevelopment projects along the Hudson River have transformed the area into one of New York’s most desirable destinations. The parks are fantastic, there are nice restaurants, coffee shops, etc. all along the waterfront.
For a moment, I almost felt like I was in Old Amsterdam!
PODCAST:
Retail Gets Real - Episode 214: Beyond buy now, pay later with Klarna CEO Sebastian Siemiatkowski. In this episode they discuss how Klarna is looking beyond payments with the buy now, pay later platform. Sebastian goes over the history of Klarna, various tactics he used to grow the platform in Europe and more recently their arrival in the United States. It is an interesting podcast on the BNPL space.
CONFERENCES:
World Pension Summit 2021 - October 12 - 14, The Hague, Netherlands
I’ll be on Track A3 Asset Allocation and Investing: Fiat currencies may still be in our pockets, but is it time to put crypto in our portfolios? Is crypto viable or suitable for institutional investors? Can institutional investors help stabilize this market? How long will can crypto assets last?
I hope that you enjoy the letter as much as I enjoyed writing it and please feel free to share the links with friends and associates. If you are interested in startups and are an accredited investor you can join over 750 other backers that follow my AngelList syndicate here.
Stay safe and stay well. Sean Bill / MacroCrunch / Twitter