'Responsible' buy now, pay later rival fires shots at Afterpay

High-performing fintech stock Douugh will exit a trading halt on Tuesday to announce it will launch a new interest-free buy now, pay later product as part of its "financial wellness" neobanking app, which launched in the US market last month.The product expansion will initially be available in the US only, and comes after it raised $12 million in a heavily oversubscribed capital raise, which its founder and chief executive Andy Taylor said would be used to help its US customer expansion drive.



The buy now, pay later product is being launched in partnership with fellow listed fintech stock Humm, which is the new name for industry pioneer Flexigroup.It will be known as Credit Jar and will offer eligible customers a credit limit of up to $1000, which is paid back over six automatic weekly instalments.News of Douugh's intention to expand into the booming buy now, pay later space – most famously occupied by Afterpay and Zip Co – was first revealed in Street Talk on Friday.

The capital raising was managed by Canaccord Genuity, with Humm acting as the cornerstone investor by ploughing in $2.5 million as a strategic investment.Shares in Douugh have soared since it listed via a reverse takeover of Ziptel in early October. It listed with a share price of just 3¢, but was trading at 26.5¢ when its shares went into a halt on Friday morning.Afterpay and other buy now, pay later [services] are credit products and they need to stop pretending it isn't and make sure people can afford it.— Andy Taylor, Douugh CEOAsked whether a buy now, pay later product was an appropriate fit for a company that has based its sales pitch on using artificial intelligence to help customers prudently manage their financial affairs, Mr Taylor said he was providing a sensible, credit-based product that was completely different to the likes of Afterpay.Credit Jar will have a dedicated linked virtual Mastercard to it, and customers will be subjected to full credit and responsible lending checks. It is intended to be used as a safety net for unexpected expenses, rather than a way to impulse buy products."We are making a distinction that point of sale buy now, pay later is a race to the bottom," Mr Taylor said."I've always been a firm believer that responsible lending and trying to help customers consolidate credit card debt is what we need to do, and buy now, pay later has just incentivised the wrong behaviour in terms of instant gratification around consumable goods."I'm in [Commonwealth Bank CEO] Matt Comyn's camp on this one, Afterpay and other buy now, pay later [services] are credit products and they need to stop pretending it isn't and make sure people can afford it."I get that they say they are a marketing platform for retailers, but they are still giving credit to anyone that will just attach the debit card without doing any assessment. I mean, that's just wrong."Afterpay rivals line upMr Taylor is the latest rival financial services player to take aim at Afterpay, after the global chief executive of its CBA-backed rival Klarna, Sebastian Siemiatkowski, described its fees as "extortionate" and urged the Reserve Bank to regulate pricing.The investment and partnership with Douugh also represents a significant move for Humm, which in its guise as Flexigroup has been a less heralded player in the buy now, pay later space, despite having been around longer than any of its rivals.Its shares surged in late October after it announced a deal with Mastercard, in which it will roll out its buy now, pay later product to global banks to help them compete against the likes of Afterpay by white-labelling its bundll product.The Douugh partnership is not based on that deal, but is another attempt to target new revenue streams via partnerships with other brands.Humm will be the wholesale balance sheet funder of the Douugh credit lines and take on any losses, but the two companies will share the profits.Flexigroup officially rebranded as Humm on Monday, to reflect the importance of its buy now, pay later product. Chief executive Rebecca James said it was now more clearly positioned in the buy now, pay later market."From a standing start 18 months ago, Humm has become synonymous with easy, digital, interest-free finance, with over 2.2 million customers across Australia, New Zealand and Ireland," she said."Our mission is to revolutionise the way people buy. With a single platform serving everybody from Generation Z and Millennial spenders through to young families and SMEs, Humm finances everything from life’s little luxuries through to significant purchases."

Ms James said the proposed joint venture with Douugh was important as it represented Humm's first steps into the United States as a company. She also said that by investing in Douugh through its Humm ventures division, it was demonstrating how it could create innovative and novel ways to expand the relevance and distribution of its technology."As Australasia’s original fintech partners with America’s newest Neobank, we are proving that we can take what we have learned locally and apply it on the global stage," she said."Disrupting the payments industry and providing better customer experiences across the world.”