IOU is looking to serve the unbanked and underbanked. The reason for a DBL is for exactly the same purpose. That's the only link. BNPL for a time became hype and was traded as such. Most businesses jumped into the scheme with both feet.
I've been following the trends, rise and fall of businesses taking on the "one-click" checkout business model. There was a company named Fast which was led by an Australian bloke. I said, was because as of yesterday the company announced that it was closing because funding ran out. This company was backed by Stripe and other fortune 500 businesses. I read an article yesterday about another company named Bolt which is doing the same one-click checkout model. The company is valued at $11b. The founder is one of youngest billionaires in the US. Again, funding is going to become an issue as the business is growing rapidly but not rapidly enough to justify the lofty valuation off the back of revenues of $40m.
Why are these businesses getting so much funding? Well, it's all in the numbers. Amazon sold $600b worth of goods, Shopify merchants sold $175b and that leaves remaining businesses eligible for online selling worth around $4.9 trillion. This is the target market for one-click checkout that companies like Bolt and Fast are targeting.
Why am I talking about a similar but different business model? Opportunity is how you sell an idea. This is how business owners and management secure funding. They sell an idea. This is exactly what happened with BNPL. When an idea is sold so we'll, everyone wants a piece of the action. If there's no moat then there's nothing to stop everyone from getting a piece of the action. The difference though is in the planning.
AfterPay execs pushed the new style of lending and the timing was perfect. Low interest rate environment, lots of funding and an innovative idea. Growth sky rocketed but it came at a hefty price. When the economic environment began to change, margins were eroded and the business model began to look less attractive. The BNPL model began to look more and more like another payment method than a business model. A payment method that attracts customers and increases sales for merchants, so it has its merits. It's still a cash burning machine though. Block acquired AfterPay to strengthen it's offering as a digital payments company.
A good idea does not make a business. Often the businesses that burn the brightest burn out the quickest as we saw with One-click checkout provider Fast. Without a profitable business model Z1P is also struggling. Speed and growth were the key to business success in a low inflation, low interest rate environment. Profit and sustainability are now becoming the prevailing catch cry for businesses. To become profit or to increase profit takes strong margins and strong customer demand.
In an online first world, digital payments prevail. DBL, BNPL or one-click checkout it doesn't really matter. They're all a vehicle for the same thing; digital payments. As long as the customer is hooked and the margins are good there's a big enough pie for many companies to carve out a slice. IOU have the pieces and are putting them together whether management communicate each week or not.
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