We’re now nine days away from Christmas. Yes, we’re down to single digits.
So, will we see a retail revival or has Santa gone missing in 2019?
The ASX’s newest listing will certainly be hoping for the former. Yet another ‘buy now, pay later’ provider. One that has been around the block for some time.
They’re called Openpay [ASX: OPY]. Set to trade under the ticker OPY.
But, is their public debut a prized ham, or a lump of coal?
Let’s find out…
Openpay – late to the party?
Founded in 2013, Openpay isn’t actually all that new.
It has been around just as long as Zip Co and predates Afterpay by two years. A history that will lend some credibility to their float.
They’ve taken the time to build and develop their platform. Unlike some of the newer, more untested ventures of late.
Because of this, Openpay has a very familiar business model.
In fact, if anything, Afterpay may have copied Openpay. Both companies are nearly identical in terms of their BNPL service. The key difference is that Openpay lets users choose the terms.
Unlike Afterpay’s regimented fortnightly payment plan, Openpay is flexible. Users can choose how long and how much they want their installments to look like. Within reason, of course.
At face value, it’s hard to see why a consumer wouldn’t choose Openpay given a choice between the two.
But, that is precisely the point. Often there isn’t a choice.
Afterpay and Zip have dominated the merchant market. They lined-up and signed-up multitudes of retailers onto their platforms.
Today, Afterpay has roughly 40,000 merchant partners.
In contrast, Openpay has just 1,754 active merchants.
This discrepancy is the big divide between the two companies in my view. Because unless you’ve got the channels in place, there are no customers to leverage.
Now, it may be too little, too late. The BNPL market is rapidly becoming saturated. Filled with companies all trying to win over merchants and customers.
They need to demonstrate what kind of value they can offer that others can’t.
Otherwise, this float will look like a weak cash grab. A bid to jump on the bandwagon while the sector is hot.
Room to move
Now, having said all this, Openpay does have plenty of upside as well.
Management seems to realise that they need a niche. And that niche is the flexibility of their plans. As they note in their prospectus:
‘The flexibility of Openpay’s offering allows us to provide plans of between $50 and $20,000 in value, and ranging from 2 to 24 months in duration.’
That sort of money and time frame is more like a personal loan than a BNPL service.
Afterpay limits its users to $2,000 purchases. And that is only if they have a good track record of repayments.
Therefore, Openpay could find success with pricier, more sophisticated purchases. Collecting fees and interest from customers along the way.
In other words, they may process fewer transactions, but extract more money from them.
It could be a masterstroke or it could be a dud. No one knows long term.
But, right now they are growing. Which is obviously a positive.
Whether it will continue growing though, is the ultimate question.
Luckily Openpay aren’t limiting themselves to just Australia. They’ve already dived into the UK market, with an early but promising splash.
Indeed, much of the IPO capital will go towards funding growth in the UK market. Amongst other plans.
Openpay certainly has potential, but whether they can achieve it is up in the air.
Just like most of the BNPL services to be fair.
Should you invest in Openpay?
Right now I would keep an eye on Openpay.
Diving into a stock on its first day of trading is risky. I would expect any movement to be extremely volatile.
No doubt some people will jump into the stock for fear of missing out. There is a lot of interest in this sector.
That interest (or obsession) could push the stock higher.
Or, traders could take a more dim view and write this float off as a cash grab. Just like I said earlier.
Therefore we could also see the Openpay share price sink.
There is a case for either outcome and the market will decide its fate. Until we get a sense for the markets sentiment though, it’s probably best to sit on the sidelines.
In the meantime, check out our report on three other fintech stocks. Companies that have bit more market history to them. Not to mention some distance from the BNPL craze…
For Money Morning