Meet Opy: The Groundbreaking Innovator of Buy Now, Pay Later

Outside of the United States, the Buy Now, Pay Later (BNPL) industry has taken the world by storm. Although the term may be fairly new in the U.S., installment payments are not; in fact, it was the most popular form of credit in the 1970s and was the inspiration behind the eventual launch and release of the modern-day credit card. Today, Americans owe approximately $820 billion dollars in credit card debt, a jarring number given the implications deficit can bring.

However, the BNPL model offers consumers the ability to purchase a product or service and pay it back over an extended amount of time, with low to zero interest and fees. In addition, rather than a large lump sum charged to a credit card in one single transaction, consumers can opt to spread payments out, a solution that helps shoppers’ budget better and avoid falling deeper within the slums of credit card debt.

Like any loan or borrowed form of payment, BNPL can have its obstacles, with numerous limitations on how high of a ticket item can be purchased through BNPL, as well as for how long payments can be made. With the many restrictions most traditional providers implement, one company, in particular, wanted to become the driving tectonic change in the payments space, seeking to provide a financial solution for consumers who craved transparency, flexibility, and affordability – meet Openpay.

Openpay Group Ltd (ASX: OPY) is a global, fast-growing, and highly differentiated provider of BNPL payment solutions. Openpay delivers the most flexible BNPL plans in the market through its platform, with longer terms – up to 24 months – and with higher limits of up to $20,000. In December 2020, on the anniversary of its initial public offering, Openpay launched Opy USA (Opy), its U.S. counterpart, with the mission of providing a greater range of meaningful financing opportunities for consumers across all industries. Unlike other BNPL companies, Opy enables strategic purchase planning, predominately focused on big-ticket purchases in Home Improvement, Education, Auto Service and Repair and Health (including Dental and Veterinary practices), for consumers who are more financially mature than typical customers of traditional providers. Opy takes the no surprises, fixed costs approach and expands this to bigger dollar, longer-term arenas with no hidden fees or accrued interest charges.

The benefits of Opy are next generation, as it enables life-changing purchases for consumers, avoiding additional credit card debt and eliminating the risks of traditional POS lending. Coined as the ‘Buy Now, Pay Smarter’, solution, it’s valuable for merchants as well. Not only can businesses provide payment alternatives for customers to afford meaningful purchases (this is particularly true for customer demographics that, without BNPL, may not be able to budget for larger purchases otherwise), BNPL also boosts key business metrics of conversion and average transaction values. Additionally, with Opy, consumers are confident that they can pay off an item with ease, resulting in loyal shoppers who will choose merchants with BNPL options in the future.

BNPL isn’t just a concept, for even the largest financial institutions are scrambling. Earlier this year, Jamie Dimon, Chief Executive Officer of JP Morgan Chase, warned his C-Suite team to be alarmed of the changes BNPL would extend among American shoppers, urging them to be “scared s- – -less.”

The U.S. payment landscape is going through a substantial change. Players like Opy have separated as the modern human equivalent in contrast to the Neanderthal BNPL version 1.0 and legacy payment providers by standing tall and looking to the horizon. Opy brings fairness, transparency, and flexibility to merchants and consumers alike, thereby building the payment solution consumers crave and defining the future of payments; it’s exciting to be a part of the sunrise on the evolution in payments fintech.

Brian signature

As The Sun Rises, The Heat Is On For Traditional Lending & Payments Players.

The U.S. lending/payments market continues to have an ongoing, unresolved, systemic, and age-old conflict between merchants and credit card issuers. Without regulated credit card pricing and with a card issuer stranglehold on the consumer, it has been left to the commercial market to innovate itself out of this problem. Whether it is a cryptocurrency, faster payments, or Buy Now, Pay Later (BNPL), many new choices are coming to market, which merchants need to consider for their checkout experience. It’s all about evolution – with legacy payment solutions being the equivalent of our distant Neanderthal cousins and new payment solutions providers the equivalent of modern humans.

At the helm of this disruption is BNPL, a rapidly expanding global payment option that allows customers to flexibly make online or in-store purchases and pay the balance over time in installments. If used correctly, it can be a powerful budgeting tool for financially mature customers and a source of increased sales, average transaction value, wallet share, and a source for new customer acquisitions for merchants.

Predictably, this year’s discussion among merchants focuses largely on emerging BNPL payment options. At the recent MAG MYC key stakeholders from the payments industry and member merchants were brought together to discuss and provide insights on the latest topics within the payment domain.

The apotheosis for merchants remained the fact that they experienced a 20%-30% lift in conversion rates and 50-80% increase in average order value by adopting BNPL features, while repeat business improved by up to 20%. Additionally, discussions with payment professionals focused on how to choose the right BNPL partner for a merchant’s business. A perfectly matched BNPL partner would ensure that the merchants would ride the wave of rising toplines, increased market share, seamless customer experience, and higher volumes (as this option directly affects and reduces “cart abandonment rates”). To this effect, Brian Shniderman, CEO OPY USA, and Dean Sheaffer, Executive Consultant Specializing in Payments/Emerging FinTech, engaged with participating merchants to help them cultivate the correct framework to assess the right BNPL partner for their businesses.

In addition, John Drechny, CEO MAG, also focused on BNPL while discussing considerations for merchants while adding a new payment method, some of which included avoiding exclusivity agreements and volume requirements, enhancing customer experience, providing soft ROI, and long-term co-branding opportunities and value proposition for the merchant.

Amongst other industry conventions held this year was also the NRF that conducted a webinar on “Five things, merchants need to know about Buy Now, Pay Later lending,” where Brian Riley, Director Credit Advisory Service, provided his insights on this emerging payment option.

With all this talk around BNPL, there is a pressing sense of interest within the merchant community to know more about this exciting and emerging payment option, estimated to be a ~$650Bn to $1Tn market by 2025! BNPL seems to be the biggest payment transformation since credit cards, and this innovation is no longer a ‘nice to have,’ but a growing expectation that merchants need to take notice of. According to Barclay’s research, while BNPL currently represents a small portion of global e-commerce spending, it is growing rapidly. Worldpay’s 2021 Global Payments Report anticipates BNPL share of global online checkout will double by 2024 and more than quadruple in North America, where BNPL currently represents <2% of total e-commerce spending. While geographies like the Nordic countries, Europe and Australia have a higher penetration of BNPL in e-commerce, there is a significant potential for growth in this sector in the U.S.

While BNPL offers merchants riding toplines, increased market share, etc., growth in this market is also fueled by customers looking to avoid traditional forms of debt and making otherwise out-of-budget purchases without having to go to a bank. As a result of these market dynamics and the US market potential, many global BNPL giants like Openpay have launched in the US, after having captured the Australian and British markets.

However, the growth and flurry of developments in the BNPL space come amid calls for greater scrutiny and regulation of delayed payment providers, with campaigners across the Atlantic in the UK warning against consumers unwittingly racking up mountains of debt. The MAG MYC also touched upon these rising concerns, particularly on issues relating to regulatory compliance, higher costs (APRs), transparency issues (surprise costs/fees including accrued/deferred interest, exorbitant late fees, etc.), consequences on merchant/consumer experiences and most importantly irresponsible lending.

By augmenting alternative credit data to ensure high credit approval rates and transparency (no hidden fees) many providers have started to address these consumer/merchant issues, but the ethos of responsible lending and the required empathy to partner with consumers when they have unexpected circumstances (e.g., restructuring the payment schedule) is usually driven by the BNPL partner’s vision and the value they want to provide to their customers.

With these evolving issues, the current BNPL offering, or BNPL 1.0, is in a state of rapid change and advancement. The market is gradually making way for the NextGen BNPL which is closer and more suited to address the flexible needs of stakeholders including merchants, consumers, and regulators. NextGen BNPL is a highly evolved “Buy Now, Pay Smarter” (BNPS) solution, and significantly different than v1.0, making it the “modern human” to its soon to become extinct cousin, the BNPL 1.0 “Neanderthal”. How so? That is easy:

  • NextGen BNPL is “For Merchants, by Merchants” – Businesses that are closest to the consumer have direct and meaningful influence over the features and functionality of the BNPL solution that can dramatically affect their relationships with their customers. That makes it smarter for the merchants.
  • NextGen BNPL fairly shares the solution’s costs and rewards amongst merchants, consumers, and the provider. Merchant costs are transparent and more than made up for incremental sales, margin, and customer loyalty. Consumer costs are transparent and fair with no hidden “gotchas” or exorbitant APRs. The BNPL provider is fairly rewarded for eliminating payment system risks and enabling a system that is better for all stakeholders. That makes it smarter for consumers and much more regulator friendly, which is in turn smarter for everyone.
  • NextGen BNPL is flexible. Different verticals like Home Repair, Education, Healthcare and Auto repair and servicing have distinctly different needs when it comes to BNPL solutions and it is incumbent on BNPL providers to enable this differentiation. Consumers need the ability to manage their cashflow and budget; Solutions need to offer flexibility in terms of higher limits, longer terms, consumer selection of payment due dates and payment frequency. This makes it not only smarter but financially healthier as well, which is incidentally also the reason for the fall of the Neanderthals (Read as BNPL 1.0)!

Interestingly, global BNPL players entering the US market, like Opy (Openpay’s U.S. arm), are trying to build solutions focused less on the momentary transactions and more on relationships, by providing a greater range of meaningful financing opportunities. Opy’s NextGen BNPL offering is not solely focused on impulse transactions like “t-shirts and tennis shoes”, but has been designed for “tires and teeth” bundled with the most flexible payment plans that the US BNPL market has witnessed till now, with longer terms up to 24 months and higher limits of up to $20,000. When a crown turns into a root canal or a leaky faucet turns into a bathroom remodel, Opy provides the smarter way for consumers to manage their cashflow without excessive interest rates.

Opy is also trying to solve a complex myriad of compliance issues by aligning the best industry minds to head their compliance and product development and offering a NextGen solution. OPY USA recently welcomed Gary Stein as their Chief Product & Compliance Officer who brings in 30 years of experience in financial services focused on ensuring safe, affordable, and transparent lending and payment solutions, and has been instrumental in helping OPY establish transparency and flexibility through tailor made products for the US market.

OPY USA led the way at MAG MYC this year to engage with merchants across forums, to bring together insights, industry knowledge and expertise to develop a BNPL solution which is truly made ground up for the U.S. market – for merchants, by merchants. To formalize a two-way parley, OPY has piloted the OMAC (OPY Merchant Advisory Council), comprised of merchant leaders in each of OPY’s target verticals along with partners and providers that can play key roles in the design, development and deployment of their BNPS Solutions catering specifically to U.S. consumer needs.

The U.S. payment landscape is going through a tectonic change. Players like Opy have separated as the modern human equivalent in contrast to the Neanderthal BNPL v1.0 and legacy payment providers by standing tall and looking to the horizon. Opy brings fairness, transparency, and flexibility to merchants and consumers alike, thereby building the payment solution consumers crave and defining the future of payments; it’s exciting to be a part of the sunrise on the evolution in payments fintech.

A peek over the horizon.

Openpay offers a highly differentiated, better BNPL solution for consumers and merchants. While Openpay can compete in retail with transaction values below $1,000, Openpay has a sweet spot for supporting higher value transactions up to $20,000. This flexibility in transaction ranges increases the market range beyond low-ticket value retail to include verticals such as Healthcare, Auto Repair, Home Improvement, Education, and large ticket retail. This, in and of itself, is exciting, as Openpay expands beyond Australasia and the UK, entering into the massive US market to become OPY USA (OPY).

But there’s much more to OPY that makes it exciting and at an entirely different level.

The US market is massively larger; it has an ongoing, unresolved, systemic, and age-old conflict between merchants and credit card issuers. Without regulated credit card pricing (interchange), and with a card issuer grip on the consumer (via US consumers’ preference for credit card rewards), it has been left to the commercial market to innovate itself out of this problem.

What OPY will do in the US market is much bolder than what meets the eye at first glance with the value proposition’s baseline mentioned above.

With OPY entering the US market with a stronger value proposition, enabled by the business model and platform designed for the US, we might witness a market shift of up to 10% of all high dollar credit card spend to BNPL. Let’s absorb that for a minute. 10% of a $3.9T market.

OPY will be one of the first US companies to introduce this model and boldly lead the merchants towards the payments alternative they’ve sought for so long. This value proposition has the potential to:

  • Drive more revenue, and – at scale – could do so at a lower total cost of customer acquisition and processing for merchants.
  • Redirect consumer loyalty to the merchant, rather than the issuing bank and card networks.
  • Give merchants instant access to working capital by using the instant payment rail(s).

At scale, merchants would receive a much more valuable, and therefore cost-effective, payments solution than the interchange-based credit card model that they’re forced to accept today.

What you have to believe for this to be true:

  • A material proportion of the US consumer market would prefer installment with rewards at a zero-interest rate over credit cards for high dollar transactions. OPY’s transparent pricing and clearly stated fees and terms vs. the revolving, open-ended nature of credit cards is a key feature that will attract consumers who are seeking control.
  • Giving only 30 days to pay with no periodic interest via credit card pales in comparison with 12 to 24 months via OPY.
  • OPY customizes credit to the consumer’s borrowing situation by considering the consumer and merchant/SKU together and offering a fixed term. The result is a tailored credit product that helps consumers/borrowers succeed (repay on time), which in turn allows access to credit expansion, and in turn for merchants, creates opportunities for market expansion.
  • When it comes to credit card reward programs, while they attract transactors and likely some revolvers, these programs ultimately drive interchange costs to merchants. A relatively small percentage of cardholders utilize most current credit card rewards. With current credit card rewards programs, there is a subsidization effect: many consumers pay the program’s costs, but few reap the benefit. OPY will provide rewards and benefits that resonate with borrowers without creating a two-class system that exists with credit card rewards today.

This is intended to be achieved through a wholesale distribution strategy, and network OPY is lining up with the large US banks, payments processors, merchant aggregators, and an online marketplace.

The team OPY has assembled to accomplish this bold vision consists of veterans from the merchant and payments worlds. Former chairs, presidents, and senior partners from some of the largest names in retail, banking, fintech, and their advisors.

What you should know:

Given the boldness of the larger OPY vision, many of the incumbent, traditional players like card issuers may feel threatened. Still, some like Michael Miebach, the new CEO of Mastercard, understand and have invested billions in diversifying and participating in this tectonic shift. His strategy to acquire Vocalink, Nets, and Finicity are only three examples of clear evidence that he is unchaining the networks from their history of the issuer-controlled payment system and credit cards.

And it’s leadership like this that helps prime the US market for OPY, and why I believe in the significance of OPY’s US sunrise. Time for sunglasses? Together we will shine the light on the future of payments.

Openpay’s Sunrise into the US Market.

As announced to our shareholders on December 16, 2020, Openpay (ASX: OPY) has officially entered the United States. I have the privilege of becoming the US CEO and Global Chief Strategy Officer. I’m thrilled to take on this important role, and at a critical time.

So, why is this move so significant? And why would a senior partner from one of the most successful consulting firms in the world, happily enjoying running the most successful global payments practice, leave it all to take on this new role. And, why do so during a global pandemic?

Along with lots of encouragement, I’ve received hundreds of similar questions in calls, emails, and messages from my clients, colleagues, connections and followers on LinkedIn and Twitter. And, now that I have officially retired from Deloitte, I am excited to answer these questions and begin a dialogue with all of you about what could very well be a material long term, needed change in the US payments system.

For many of you, the answer will be interesting. But, for the majority of you who are directly impacted by changes to the US payments landscape, such as merchants and corporates across all industries, I think you’ll find the answers to be important, maybe even exciting.

First, a quick introduction to the company where I just became US CEO, Openpay. Openpay is a payments fintech operating in four countries across Australasia, Europe, and now North America. The company offers B2B and B2C solutions distributed through merchants, payments processors, and other aggregators (e.g., co-ops such as large shared-services organizations that provide payments services to medical/dental offices like Dental Services Organizations).

I’m thrilled and energized to take on this important role, and at an important time

Brian Shniderman

Openpay’s current focus is in Auto, Home Improvement, Healthcare (including Veterinarians), Education, and larger ticket Retail (e.g., Sports Season tickets). That’s the successful focus today, and we will very thoughtfully and selectively expand as the solutions become ‘cross-industry utilized’ by Openpay’s fast-growing consumer base.

Thousands of merchants offer and use Openpay solutions today. This is because Openpay is the most merchant, corporate, and consumer-friendly payments option available in their markets, from a company that places its responsibility to fairness and transparency ahead of self-interests. This is reason number one that sold me on joining – their integrity.

While others mask their payments solutions in opaque promises that can harm consumers and often damage the relationship between the merchant and their customers, Openpay has stood steadfast, refusing to set such product ‘traps’ even though they could mirror other payment options that generate effective APRs of over 25% while claiming to be “interest-free.” Others push ‘zero down’ payment offers for anyone that “qualifies’,” when we and those providers know, that such offers often result in avoidable problems for the most vulnerable consumers. That’s neither fair nor transparent.

This is also why, as part of my senior leadership team, I brought on Gary Stein as my Chief Product and Compliance Officer. Many of you know Gary as a leading expert in payments regulation, joining us from the CFPB. Gary also brings a background in payments innovation and achieving the balance of internal product performance with trust, transparency, and fairness, which is Openpay’s core value proposition.

Openpay’s Solutions
Openpay’s flagship product is a true interest-free, highly differentiated installment with flexible payment terms matching the unique time periods specific to industries. For example, this buy-now-pay-smarter solution can mirror the specific duration, longer-term, and larger ticket size associated with financing orthodontia. A parent or patient faced with paying for a medical procedure that needs to spread out a $5,000 cost, requiring 12 visits across 18 months, can be easily supported by Openpay, where most others offer only inflexible ‘pay in 4’ installments and/or only a 6-month maximum duration.

I’ll explain in a later post in more detail why this is so relevant and important in the US across other merchant categories and purchase types. Suffice it to say that across all of my clients who I’ve introduced to Openpay since learning about the Openpay offerings, there has not only been strong demand for their solutions, but some have already lined up to implement immediately when the platform goes live in Q2 2021. That’s reason number two I was sold – demand.

Openpay’s growth rate to-date has been an impressive 64% YoY. However, as I commented in some of the press interviews, “The US is the market.” With $5 trillion in transaction volume, the highly differentiated Openpay solutions and their success have yet to be exposed to the massive US market. The growth potential and relevance are significantly greater than even that seen in Australasia and Europe to-date.

The opportunity is not just born from the sheer size of the US market. The US system is much more in need of Openpay’s style of payment solutions. The US payments ecosystem is in many ways far behind that of other developed countries. Antiquated practices cost merchants and consumers a too high amount, far more than in other countries that enjoy modernized payments practices and solutions. The cost and experience in the US are, simply put, byzantine. It is slow, unfair, non-transparent, and expensive for all parties, especially merchants and consumers.

OPY’s flagship product is a true interest-free, highly differentiated instalment they offer their customers today with flexible payment terms that match the unique time periods specific to industries.

Brian Shniderman

And, the excuses many attribute to the US slowness to improve are increasingly falling short of credible. Thanks to the Federal Reserve, followed by bold actions from The Clearing House, we now have an operational real-time payment solution RTP™ up and running, with a second called FedNow on its way in a few years. Thanks to investments from multiple solution providers, we have the tools and methods to provide alternative risk scoring for ‘thin file’ businesses and consumers, alike.

Yet with all of that, we still haven’t introduced a platform that genuinely places the merchants, corporates and customers first. And, I believe that’s about to change with the launch of Openpay USA and the platform being Americanized from its current European and Australasia ‘cousin platforms’.

For this reason, I’m happy to announce Troy Carrothers has joined the Openpay team as Corporate Advisor. Troy brings a proven financial services and retail history of creating improved payment options for merchants and customers. Many of you may know Troy from his role building and leading the credit organization at Kohl’s, others may know him from his contributions to the merchant community while serving on the board of the Merchant Advisory Group.

An Americanized Vision for an Americanized Platform.

The US payments market has its own needs and idiosyncrasies. Not just because of the complexity of different regulatory requirements in every state, but also because of merchants and consumer preferences. An example is the strong desire for a compelling loyalty and rewards element to the use of payments methods of choice. There has yet to be a compelling BNPL or installment loyalty offering that can compete with US credit card issuers’ traditional affinity programs.

Creating a platform that dynamically meets the regulatory requirements, preferences, and needs of the diverse US demographics, with tailored flexibility across industries, is not an easy task. But, Openpay is well on its way to creating that promising platform, with a head start and an AWS SaaS platform that is flexible, scalable, and which will be ready for our first foundational US customer in Q2 2021.

This is all just in time for what I believe will be a spending resurgence as we heal our country and emerge from the pandemic to rehire, create new jobs, and see signs of increases in pent up spending for the precise categories Openpay thrives in, health, home, auto, and education. This is the third reason I was sold – Openpay provides the right platform at the right time.

Over the next four weeks, my new management team and I will be setting up virtual working sessions with merchant user groups to gather input on the Americanized Openpay platform. We invite you to actively help us design the new standard for payments that promises to be significantly better, transparent, flexible, and designed by and for merchants, corporates, and their customers. To participate, you can either reach out directly to me or contact Dean Sheaffer, who is coordinating these sessions in partnership with the largest merchant and retailer organizations.

And finally, if you’ve made it this far, I’d like to wish you, your families and organizations a very healthy, and happy new year. I am optimistic that 2021 will bring great healing and renewed prosperity to all of us, and most importantly, to those who need them most.