It's interesting on the cost of funds. I believe in the current low rates environment the Splitit team should be able to reduce that.
Does anyone has colour on the 8% fund costs? Is that on an annualised basis? If so, then a 6 months BNPL will still make a profit for the company?
See below for a sample computation assuming 8% p.a and 3% merchant return to Splitit for a $1000 purchase split over 6 payments. It shows a profit of $6.67. Note I have also assumed that the purchaser doesn't pay anything upfront such that month 1 is full interest cost on $1000, if this is excluded, then the total cost of fund is even lesser (profit is $13).
I'm happy to expand and refine this if anyone has further information.
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
1
Opening
1,000
833
667
500
333
167
2
Payment
-167
-167
-167
-167
-167
-167
3
Closing Balance
833
667
500
333
167
0
4
5
Monthly Interest Cost @ 8%p.a.
-$6.67
-$5.56
-$4.44
-$3.33
-$2.22
-$1.11
6
Merchant Fee @ 3%
$30.00
7
Total Return to Spiltit
$23.33
$17.78
$13.33
$10.00
$7.78
$6.67
SPT Price at posting:
$1.47 Sentiment: Buy Disclosure: Held
