The Openpay Group Ltd [ASX:OPY] announced a partnership with Cross River Bank to support the BNPL provider’s expansion into the US market under the OPY brand.
Cross River is a New Jersey state-chartered, Federal Deposit Insurance Corporation (FDIC) insured bank aiming to blend new technologies with the traditional services of a bank.
OPY thinks the partnership can help it launch a US platform to facilitate Cross River’s origination of ‘buy now, pay smarter’ consumer loans.
The market was less thrilled. Openpay Group Ltd [ASX:OPY] share price is currently trading at $1.27 per share, down 2.3%.
After much hype — led by high-flying Afterpay Ltd [ASX:APT] — the ASX BNPL sector is cooling off. OPY itself shed 55% over the last 12 months, well underperforming the ASX 200.
But is the new partnership a strategic move that can turn Openpay’s fortunes around?
Let’s delve into the details.
OPY partners with Cross River Bank
Openpay said today the strategic partnership with Cross River will allow it to facilitate Cross River’s origination of what OPY calls ‘buy now, pay smarter’ consumer loans and tap into the lucrative US market.
Cross River will provide Openpay with a lending platform and a ‘robust compliance framework’ to expand Openpay’s reach across the US market.
The collaboration will allow OPY to offer closed-end consumer loans in amounts up to US$20,000 with terms up to 24 months originated and funded by Cross River.
When a consumer applies for a loan on the OPY platform, the loan is underwritten by Cross River utilising OPY’s approved risk models and Cross River’s own credit underwriting framework.
Once the consumer selects their desired plan option, the loan is funded and originated by Cross River and serviced by Openpay, allowing it to administer the consumer experience end-to-end.
Cross River will serve as the lender for all OPY-branded loans originated in the US.
OPY will receive revenue from a mix of merchant fees, loan origination facilitation fees, and consumer charges on loans that OPY purchases.
Openpay’s US CEO Brian Shniderman said:
‘Cross River is in a unique position in the lending ecosystem, and we are thrilled to choose Cross River as our partner in the US where we are already experiencing incredibly strong demand for our plans.
‘This partnership will enable OPY to successfully fill a large void in the existing US market with our longer, larger, customized and interest-free product.’
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OPY share price outlook
Openpay said it will use the partnership to continue focusing on its key verticals: healthcare, auto servicing, home improvement, private education, and large ticket retail industry sectors.
OPY also flagged it is expecting to announce additional partnerships in the near future, but no further detail was offered.
The market’s flat reaction to OPY’s announcement suggests investors are unsure about the commercial impact of the partnership with Cross River.
While OPY said it expects to record revenue via merchant fees and loan origination fees, no expected range was given. The financial boost to OPY’s top line is hard to quantify from today’s announcement.
And while moving into the large US market is an important strategic step, investors may be unsure if the Cross River partnership is what will see OPY take off in the US.
Now, if you are interested in fintech stocks, but are not necessarily keen on the saturated BNPL sector, then you may enjoy reading Money Morning’s latest report on three small-cap fintechs with exciting growth potential.
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