How hoolah aims to tackle the misconceptions of Buy Now Pay Later

Millennials and Gen Zs have a new payment option at their checkout page. Termed “buy now, pay later” (BNPL), consumers only need to pay a portion for purchases, with the balance being paid for through interest-free instalments.

This payment option has made headways in European markets, with market leader Klarna being valued at over US$10.6 billion, making the Swedish startup the highest-valued fintech firm in Europe.

The entry of BNPL services in Southeast Asia should come as no surprise. With e-commerce trends accelerating, BNPL offers a tantalising alternative to credit-based instalments, especially in a region where debt is frowned upon.

According to a report by WorldPay from FIS, e-commerce transactions utilising BNPL services in Asia-Pacific are expected to double by 2023.

Credit to debit

The allure of BNPL payments is further heightened by the shift from credit to debit being observed in millennials today.

“What we have seen is that the younger generation, the 18 to 30-somethings, are more likely to use debit cards because they are more aware of the risk credit-based products possess and the debt they could incur. They are more inherently responsible, perhaps because of previous generations,” shared Stuart Thornton, Co-founder and CEO of hoolah, in an interview with e27.

The Singapore-based startup was one of the early entrants into the local BNPL market when it launched its payments platform in 2018.

Also Read: Buy now, pay later: The changing face of finance for a mobile generation

Consumers using hoolah only pay a third of the purchase price upfront, with the balance being automatically deducted interest-free over the next two months.

The platform claims transaction volumes have grown over 700 per cent year-to-date with topline sales up 350 per cent. This growth has led to hoolah actively raising for its Series B investment round, less than a year after its eight-figure Series A round.

Business model

Amidst the increased adoption of BNPL services, questions remain over the business models of these platforms. However, Thornton was quick to dispel the myth that hoolah relies on late payment fees to grow its business.

“We do have late fees in place, but they are minimal and are there to prevent consumers as opposed to driving a particular revenue stream,” he disclosed.

A check on hoolah’s website revealed late payment fees for Singapore-based consumers range from S$5 (US$3.75) for purchases made under S$100 (US$75) to S$30 (US$22) for purchases exceeding S$1 million (US$750,000).

Furthermore, consumers are given up to 48 hours past their payment deadline to inform hoolah on their inability to make repayments before they are charged a late payment penalty.

Revealing their primary revenue stem from deals with merchants, Thornton remarked hoolah’s value proposition to them is the ability to increase conversions by offering an alternative payment option for customers who might have otherwise, skipped purchasing due to insufficient funds.

The platform currently partners with over 1,500 merchants including household names such as Nike, Samsung and Secretlab.

Misconceptions

Despite the well-publicised benefits of BNPL services, the payment option still has its fair share of sceptics.

“BNPL services may give consumers, especially those whose credit profiles may otherwise disqualify them from conventional credit products, a false sense of affordability and encourage them to over-commit with multiple instalment plans,” warned Ho Kok Yong, financial services industry leader at Deloitte, in a Business Times report detailing the risks of the service.

Research detailing the impact of BNPL services in Singapore by financial comparison platform Finder showed that 27 per cent of a thousand Singaporeans surveyed admit to being financially worse off when using a BNPL service, with impulse buying being the most common mistake.

Acknowledging negative perceptions towards BNPL services remain, Thornton shares hoolah tackles these concerns by educating its users and utilising technology to identify high-risk consumers.

Also Read: 500 Startups invests in buy-now-pay-later services startup Split

“We firmly believe that it’s our responsibility to educate the consumer because ultimately, we’re looking after that consumer journey – from making that decision to purchase to repaying,” he opined.

hoolah publishes articles sharing budgeting tips and financial advice on its platform to encourage its users to make sensible purchasing decisions. Through observing user behaviour and their transaction history, technologies embedded within its platform can also identify consumers at risk of overspending and protect against it.

Expansion plans

Having garnered a wealth of experience working in the payments industry, with his most recent role being APAC Vice-President of business development at global payment processing firm WorldPay, Thornton is keen to put this experience to good use in expanding hoolah’s geographical outreach.

“When we started our business three years ago, we already had a clear intent to grow hoolah into a pan-region business,” he shared when quizzed on expansion plans.

“We designed our technology platform from the beginning to enable us to expand and at the same time, localise our capability in every market,” Thornton elaborated as he shared hoolah’s proprietary risk engine can be personalised to the markets they operate in.

Despite expanding its operations to Malaysia and Hong Kong in January and October respectively this year, hoolah is not resting on its laurels. Thornton shared Thailand represents the firm’s next target due to its retail-driven economy and popularity of social media platforms, making it an attractive market to launch BNPL services.

The CEO shared similar sentiments for the Philippines market and revealed hoolah has long-term plans to expand into Japan and Korea, where BNPL services remain nascent.

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Image Credit: hoolah

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