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Fintech's obsession with buy-now, pay-later

Fintech's obsession with buy-now, pay-later
June 14, 2021

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The fintech model of buy-now, pay-later (BNPL) has grown 200% since the start of the coronavirus pandemic and is expected to rise fifteen-fold by 2025. It's no surprise, considering the economic uncertainty the pandemic triggered combined with the increased need to switch shopping habits online and self-soothe with retail therapy. Beyond that, younger consumers who have been weary of traditional banks, find these companies more aligned with their spending habits and comfort levels.

How It Works
Retailers and e-commerce brands receive immediate payment while shoppers pay in installments, resulting in an increase in total spend and a decrease in abandoned shopping carts. Consumers love that they only pay a portion today and get the product shipped right away. 

But how do these companies sustain themselves if they pay out retailers immediately while accepting zero-interest installment payments from the customers? Here they borrow a tip from traditional credit card companies and charge a cut of the total sale, around 6% versus bank cuts that average 3%. When consumers fail to make timely payments, late fees can rack up quickly and, without much regulation in the industry, lenders can avoid scrutiny that other creditors are under.

And it’s not only Pelotons and luxurious leisure-wear that consumers are purchasing with this model. Startups are popping up to help people pay for basic necessities, like medical expenses and rent which may say a lot more about the state of our society than the frivolity of our consumption. 

Here's a look at the BNPL companies changing the face of lending.

Private BNPL Companies

💕 Klarna - The Stockholm, Sweden-based company raised an astounding $639MM last week, led by SoftBank Vision Fund. The company is gaining about 1MM users per month and credits the financial crisis of 2008 as the reason is younger audience is skeptical of traditional banks.

⛱️ Uplift - Planning a post-pandemic vacation but don’t want to pay upfront? Uplift offers a BNPL model for travel. The company took on $68MM in debt funding from Atalaya Capital Management in January.


🛋️ Kafene - The company focuses on consumers with less than ideal credit scores needing to make big purchases for necessities. The “flexible ownership” offering means a customer who misses payments will return the item with no penalty to his or her credit. Kafene raised $14MM in a Series A this month.

👌 Zilch - the UK BNPL company raised an $80MM round B in April and now boasts a $500MM valuation.

This week’s SPAC and IPOs

 

💪 ATI Physical Therapy: Physical rehabilitation at home 

SPAC: FAII

Acquirer: Fortress Value Acquisition Corp. II

 

🕹️ PlayStudios: Video games

SPAC: ACAC

Acquirer: Acies Acquisition Corp.

 

💳  Angel Oak Mortgage: Investment management & financial advisory

IPO: AOMR

Expected Share Price: $20-21

Shares: 8.05MM

 

🔬 Lyell Immunopharma: Biotechnology to combat tumors

IPO: LYEL 

Expected Share Price: $16-18

Shares:$25MM

Since last week, PrivCo has added:
398 Companies | 156 Funding Activities | 187 M&A Deals

Funding & Deal Highlights:

 

Kafene raises $14MM from Third Prime Capital and Global Founders Capital

Fintech Software & Internet Services • Round A • New York, NY
 

Eightfold.ai raises $220MM from SoftBank Vision Fund

AI Software & Internet Services • Round E • Santa Clara, CA
 

Slintel raises raises $20MM from GGV Capital

Sales Software & Internet Services • Round A • Mountain View, CA
 

MaintainX raises $39MM from Bessemer Venture Partners 

Software & Internet Services • Round B • San Francisco, CA
 

Prefect Technologies raises $32MM from Tiger Global Management

Automation Software & Internet Services • Round B • Washington, D.C.
 

Coinalpha raises $8MM from Initialized Capital 

Blockchain Software & Internet Services • Round A • Mountain View, CA
 

Certificial raises $5.8MM from Fin Venture Capital 

Insurtech Software & Internet Services • Round A • Jersey City, NJ
 

Simulate raises $50MM from Seven Seven Six

Biotechnology • Round B • New York, NY
 

Overhaul Group raises $35MM from Macquarie Capital 

Logistics Software & Internet Technology • Round B • Austin, TX
 

ShoreMaster acquires Hydromoist Marine Group 

Industrial Products • Acquisition • Claremore, OK
 

Tata Sons acquires 1MG Technologies for $247.5MM

Health Care Software & Internet Services • Acquisition • Haryana, India
 

Fosun International acquires Sergio Rossi

Apparel, Footwear & Accessories • Acquisition • San Mauro Pascoli, Italy
 

Genstar Capital acquires 20-20 Technologies 

Design Software & Internet Services • Acquisition • Laval, Canada
 

Multi-Tech Systems acquires Radio Bridge

Telecommunication Services • Acquisition • Brooklyn Park, MN
 

H.I.G. Capital invests in CLEO Communications

Data Software & Internet Services • Growth Capital • Rockford, IL
 

Fortress Transportation and Infrastructure Investors acquires Transtar for $640M

Transportation Logistics Services • Acquisition • Pittsburgh, PA
 

InRule Technology acquires simMachines 

AI Software & Internet Services • Acquisition • Chicago, IL
 

Foreside Fund Services acquires Golden Bear Consulting Group

Professional Services • Acquisition • Newport Beach, CA
 

Bain Capital acquires ExtraHop Networks for $900MM

Analytics Software & Internet Services • Acquisition • Seattle, WA
 

KKR acquires Jet Edge International for $150MM

Passenger Transportation • Acquisition • Van Nuys, CA

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