Another buy now, pay later company is listing on Monday

Laybuy is crossing the Tasman to list on the ASX. What is the business about and how is it different to other BNPL providers?

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The buy now, pay later (BNPL) scene is pretty crowded on the ASX, but another new player is listing on Monday.

New Zealand's Laybuy Group Holdings Limited (ASX: LBY), established in 2017, is floating with an initial price of $1.41. That will value the business at $246 million.

Founder and managing director Gary Rohloff told The Motley Fool the payment cycle is the differentiator for his company.

"We're the only buy now, pay later provider in the market that offers a weekly payment option," he said.

"We're very simply weekly pay in 6 [payments]. We own that weekly space in New Zealand, I'd argue we own it in Australia, and we definitely own it in the UK."

Rohloff added that psychologically a weekly rhythm makes sense, as that's how consumers think – for example, doing a weekly grocery shop.

He told The Motley Fool that frequency has advantages for shareholders too.

"The weekly payment cycle is the most capital-efficient in the buy now, pay later model anywhere."

What will Laybuy do with the IPO money?

Laybuy first operated in New Zealand and Australia but the capital raised from the IPO will drive the UK expansion.

"The United Kingdom has a retail market that is more than two times larger than the Australian market," said Rohloff.

"It is also a market where there is a comparatively high proportion of retail shopping done online and where BNPL is still in its infancy."

The money will add to the NZ$20 million debt facility with Kiwibank and a £80 million debt facility with US finance firm Victory Park.

Consumer protection for Laybuy customers

Similar to Afterpay Ltd (ASX: APT), Laybuy earns more revenue from merchants than it does from customer fees.

"We credit check every new Laybuy customer. We also set strict transaction limits to make sure our customers can afford the goods they purchase," Rohloff said.

Credit limits don't exceed $1,200 and a 24-hour grace period is provided before a late fee is charged. That fee itself is capped at $40 (or NZ$40 or £24).

According to Laybuy, a hold is put on accounts when there are signs the customer is under financial stress.

Laybuy's current numbers and future vision

As of June this year, Laybuy had 472,961 active customers shopping through 5,672 active merchants. Each customer put through an average of NZ$460 (A$424) per year.

Laybuy, with the help of all the debt facilities and money coming in from the IPO, aims to grow to gross merchandise value to $4 billion. This is 8 times its current size.

The company is also working on digital payment cards, to allow consumers to tap-and-go at physical stores. It has a partnership with Mastercard for the New Zealand market for this reason, and EML Payments Ltd (ASX: EML) for Australia and the UK.

Rohloff told The Motley Fool that he can hardly believe what's happening after starting the business at the family kitchen table in Auckland.

"This is a very big milestone for our family and our company. Three-and-a-half years ago we launched in New Zealand and now we're listing on the Australian stock exchange. I just think that's a pretty cool thing for us."

Tony Yoo owns shares of AFTERPAY T FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Mastercard. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Emerchants Limited and Mastercard. 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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