The rise in buy-now, pay-later use has already taken a bite out of the consumer credit card market and now one provider is aiming to take on the $30 billion business credit market.
Humm, which was previously called FlexiGroup, has launched a buy-now, pay-later service for small and medium-sized companies allowing them to access up to $30,000 with no interest for up to six months.
Chris Lamers, Humm’s deputy group chief executive who is Auckland-based, said just like consumers, businesses were looking for more flexible cashflow options.
“BNPL has transformed the finance sector for consumers by making finance cheaper and more transparent. We are now bringing this to the business sector.”
Lamers said Humm was the first to offer buy now, pay later to businesses in New Zealand although it had a number of competitors in the Australian market where it has also launched the service.
“We will be first and the reason we are able to do this is because we have a commercial funding business. We have been working with small businesses and schools for a long time.”
It already has a consumer buy-now, pay-later business which provides interest-free credit up to $10,000 in New Zealand and $30,000 in Australia – a limit much higher than rival Afterpay which caps credit at $2000.
“What our research showed us was in the same way customers responded to BNPL, businesses are saying banks look after us in the good times but in the bad times it becomes much harder to borrow.
“And we have seen that over the last year.”
Lamers said it piloted the product over Christmas and already had a number of large organisations wanting to offer it to their trade customers instead of trade terms.
“We are having those discussions now and hope to be launching that in the coming months.”
So far it was mainly tradies and businesses with between one and four staff that had been attracted to it, Larmer said.
“They want to go out and buy office furniture or computers for work or they are cashflowing purchases for plumbing or building.”
Most were paying back the amount within a month using the fortnightly installment programme. Users also have the option to extend the credit beyond six months by paying 1.5 per cent interest per month and can also pause payments for a month by paying a 3.5 per cent fee.
Lamers said it hoped to disrupt the $30b business credit card and overdraft market.
“That is what we are targeting. The challenge with business credit cards is once you go interest-bearing typically you have got compounding interest and it creates a lot of additional cost – you might only need to go interest-bearing for a short period but then it affects all of your balances and most businesses don’t really understand how compound interest works.”
Humm uses the Mastercard network so, unlike other buy-now, pay-later operators, it can be used anywhere and does not require a retailer to be signed up to the service.
Lamers said the service was mainly used in-store rather than for online purchases.
Hummpro costs $15 a month if a purchase is made and charges a $20 late fee per month if a payment is missed.
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