The Openpay Group Ltd (ASX: OPY) share price has opened higher this morning following the announcement by the buy-now-pay-later (BNPL) provider of a new exclusive partnership.
Openpay announced that it's to become the exclusive BNPL provider to Pentana Solutions Pty Ltd for an initial three year term.
The Openpay – Pentana deal
Pentana Solutions is a leading provider of Dealer Management software to car dealerships across Australia. Pentana's eraPower software provides a central technology solution that allows dealers to manage their entire dealership operations.
Pentana Solutions software is used by around 2,500 new car franchise dealerships across Australia, equating to approximately 60% of the local market. Openpay currently services around 1000 dealerships directly, 60% of which are Pentana Solutions customers.
Dealerships that already use Openpay will have the option to roll over into the fully integrated solution between Pentana Solutions and Openpay upon rollout. The integration of Openpay into eraPower is expected to commence in Q4 FY20.
Openpay and Pentana Solutions will co-market BNPL services to the remaining 1,900 Pentana dealerships.
Pentana Solutions dealerships service more than 4.2 million vehicles a year, equating to around $2.5 billion in annual servicing value. Openpay stated that in its experience dealerships offering Openpay as a payment option see average requisition order increase from $450 to $950 per customer.
Partnership expected to benefit dealerships and customers
The partnership will provide benefits to Pentana's automotive dealerships and their customers. Openpay will provide customers with a tool that can assist in cash flow management or to navigate through times of unexpected purchase requirements, such as the need for new tyres or parts.
Openpay CEO Michael Eidel commented, "often motorists are caught in need of servicing or parts that they did not plan for in their cash flows. For that reason we have seen growing interest in our automotive BNPL plans – people are using Openpay to solve their immediate need, such as a car service or set of new tyres, then paying it off over a timeframe that suits their budget."
Prior to today's announcement, Openpay's existing direct agreements with automotive dealers contributed more than 20,000 BNPL plans a year and over $16 million per year in plan value. With the market share of Pentana Solutions, the agreement serves to consolidate Openpay's reach in the automotive world.
Pentana Solutions CEO Steve Kloss said, "Openpay offers a flexible product delivering higher value plans at attractive terms for our dealers and for dealer customers who are asking for buy now, pay later solutions. Openpay helps the customer better manage their cash flow and budget around car servicing. We expect this partnership to increase profitability and customer retention amongst our dealership partners."
The Openpay share price currently trades at $1.04, up 0.97% in early Monday morning trade.
