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Is Openpay the new Afterpay?

Openpay Pty Ltd is the latest buy-now, pay-later (BNPL) provider looking to list on the ASX, with meetings with investors scheduled for next week. According to The Australian, Openpay is looking to raise around $50 million through the listing, giving it a market value of $150 million.

With a growing customer base across Australia and the UK, Openpay would join the likes of Afterpay Touch Group Ltd (ASX: APT), Sezzle Inc (ASX: SZL), Zip Co Ltd (ASX: Z1P) and Splitit Ltd (ASX: SPT) as an ASX-listed BNPL provider. 

Openpay has more than 1,700 merchants and 310,000 customer payment plans on its books, numbers  that have increased 100% year on year for 3 years. 

Openpay offers repayment plans for sums of up to $20,000 that run for up to 24 months across the retail, healthcare, home improvement and automotive industries. Consequently, its customer tend to be somewhat older than those of other buy now pay later providers, with higher transaction values. 

According to CEO Michael Eidel, Openpay is not primarily a source of funding or credit for customers. Instead, he insists, the platform is “more a tool to smooth out cash flow, and a budgeting tool for people who earn their own money. . . .we’re not an instrument for someone who may just need a bit of money until their next salary payment.” 

The BNPL sector is sector is booming in Australia, with UBS estimating Australians will spend $7 billion via BNPL services this year. By 2021 that figure is expected to reach $12 billion. Some of the shine has come off the sector however, as the spectre of increased regulation has been raised. 

Afterpay shares dropped 18% over October following negative coverage by UBS. This was followed by a Reserve Bank of Australia announcement that it would investigate whether policy action should be taken to target the “no surcharge” rule enforced against merchants by Afterpay and its ilk. 

Despite regulatory concerns, BNPL shares have performed strongly overall in 2019 – Afterpay is up 115% to 26.77, Zip is up 256% to $3.92, Splitit is up 152% to 96 cents since listing in January, and Sezzle is up more than 5% since its July listing. 

Foolish takeaway

Openpay may be a little late to the BNPL listing party, but there is no doubt the sector has been popular in 2019. Whether investors have the appetite for another BNPL provider remains to be seen. 

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Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia has recommended Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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