This is not intended to defense the model nor justify its attention seeking from researchers & VCs. Like NFT platform, Buy Now Pay Later (BNPL) is a hype that everyone doesn’t want to miss out these days.
FOMO is powerful indeed. Early stage startup founder like me even get email and LinkedIn outreach from various stakeholders: research firms representing stealth mode clients, Seed Funds, VCs, Independent Investors & Angels.
Most try to get their heads around how the model works locally because the numbers don’t always justify in 5-7 years time.
What’s Buy Now Pay Later?
Simply put by its name.
You as Consumers buy a Furniture or Bedding first, pay upfront (Down Payment/ Trả Trước) 30% of the bill, then walk home with the products you love.
The rest 70% will be divided into 03 chunks to pay back in the next 03 months to EasyGop, or any other BNPL providers on the market.
Depending on the BNPL provider, you don’t have to spend anything extra. No application fees. 0% interest. The biggest selling point is that you don’t need a Credit Card.
For EasyGop, you only need 1 ID, and max 5 minutes to wait for the underwriting process to take place. Completely Paperless.
Why no Credit Card is a big deal?
You look around, you can count how many people in your family has a Credit Card (not Debit Card thẻ thanh toán)? Do you have one? Does your Mom, Uncle have one?
And most don’t realize they get charged 4-7% on FEE when they swipe a 0% interest rate instalment on Tiki for example.
That’s Consumer benefit. Most might love BNPL. We hope so.
Simply why not?
We’re the friendliest among Banks & Consumer Finance. (We also don’t knock your door like the mafia though)
What about the Business Model itself? Is it sustainable per unit economy?
The BNPL pays the Merchant first, on behalf of the Consumers.
We always have a larger amount of money to cash out for the Merchants and a proportion to keep and collect in later months from the Consumers.
There must be fund needs to continuously feed the machine. But we don’t want to keep fund our book with Equity but with Financing/Debt.
Keep exchanging Equity for the $$ to fund the cash to Merchant is one way to hell. Idk how my peers do it, I hope you guys are doing fine.
Now let’s do a $100 Furniture piece as an example (average order for EasyGop as of 2020 is actually $200)
Consumer pays $30 as Down Payment, paying $70 in the next 03 months (Tenor)
EasyGop earns $10 ( = 10% Sales Commission)
Monthly, we pay $60 to Merchants. ($100-$30-$10)
Monthly Consumer pays back $23 (= $70/3)
It’s now up to you to forecast if it’s going to be sustainable or not if the BNPL provider earns less than $10 (which is less than 10%) per each successful installment.
Minus Staff - Provision - Amortization
(I suddenly sound so smart after I put in all those in to my Unit Economy Analysis today with my Mentor ey.)
If the fate of any startup life is so clear to determine, we wouldn’t be reading this little sharing of mine. You would not find secret sauce either. Everyone has different strategy to solve Customer profiling, mitigate risk, Merchant categories, & Financing.
What is definite is that such journey takes years off my life 🔥 It’s no easy road to to ride. But I don’t plan to live that long so the thrill of getting to build stuffs excite me more.
I actually ride the ride with at least 03 other cofounders who do Math, Growth, & Tech better than me.
I’m a Transcriber. I observe & I empathize with both Merchants & Consumers. I write to let such idea let into your mind.
Maybe this puzzle is for you to solve too?
In the end, the consumer wants matter the most.
If only 10M Urban consumers pay $200 per bedding piece, it’d alrd be 2B in market size.
Naming a few SEA players such as Atome, Hoolah, Ree-pay (VN), Fundiin (VN), etc.
Besides BTC, NFT, look into BNPL closely. Down to unit economy.
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