Limepay offers bespoke BNPL service

Payments group Limepay is adamant retailers are questioning the value of traditional buy now pay later groups that threaten direct customer relationships

Limepay chief revenue officer Dan Peters and founder Tim Dwyer at their Sydney office. Picture: Adam Yip

Payments group Limepay is adamant retailers are questioning the value of traditional buy now pay later (BNPL) groups that threaten direct customer relationships, as it signed hotel giant Accor’s loyalty program to its merchant-branded payment services.

Limepay, founded in 2016, provides a range of payment services including the technology and infrastructure for retailers and other merchants to draw on to provide their own-branded BNPL service.

Limepay chief and co-founder Tim Dwyer told The Australian traditional groups like Afterpay and Zip often marketed to customers, leaving retailers frustrated that they were paying fees for a less direct relationship.

“There is sort of an inflection point where all these merchants are saying, ‘we get it, customers want better instalment choices, they want instalment plans. This is here to stay, but we want to bring this in-house and be able to own that experience’,” he said.

The partnership with Accor, which has a market capitalisation of €6.6bn ($10.6bn), sees Limepay roll out its payment option to more than 40,000 Accor Plus program members.

The hotel group — whose Asia Pacific boss Michael Issenberg was among the backers of a $6m Limepay capital raising in May — is also considering implementing the system across its hotel operations, despite the severe impact of COVID-19.

Soaring valuations and a flurry of capital raisings in the BNPL sector including by ASX-listed Afterpay and Sezzle and private companies have put the industry back in the spotlight this year.

In 2019, a lot of debate about the sector focused on the potential for it to become more regulated, in line with credit products, and there were also questions raised about steep fees being charged to retailers.

As part of the Reserve Bank’s deep dive into the payments system, it has signalled it is investigating whether changes need to be imposed to allow surcharging by retailers to recoup the cost of BNPL programs. The central bank forced credit card companies to allow surcharging about 15 years ago.

The Reserve Bank’s analysis last year said fees paid by merchants to the instalment providers mostly range from 3 to 6 per cent and are typically higher than the cost of other electronic payment methods.

Limepay was coy on providing too much information on its own fees, but revenue chief Dan Peters said: “Limepay offers all manner of payments options and not just BNPL, and we are generally lower cost than traditional credit card processing or BNPL providers.”

He said the important part of Limepay’s model was that it did not “re-target merchants’ customers and sell them to their competitors”.

Mr Peters joined Limepay from Google Australia, where he was most recently director of strategic partnerships. Mr Dwyer was the creator of fashion marketplace The Birdcage.

Limepay, which has just acquired a credit licence, will be able to offer regulated products and services as well as those in the largely unregulated BNPL industry.

Mr Dwyer is supportive of the regulatory climate and said Limepay was considering surcharging options for retailers.

“We do think regulation is great for the industry where it makes sense,” he said.

“It’s (surcharging) something we are exploring with certain merchants that obviously have very tight margins, and we feel that with a card agnostic solution it makes much more sense.”

Limepay already has more than 40 smaller businesses on its payments solution, including gym equipment group Aussie Strength and online perfume firm feelingsexy.com.au.

Mr Dwyer expects the BNPL sector “phenomenon and explosion” will continue, and Limepay has a pipeline of partnerships in the works and has held talks with 40 of the largest enterprise merchants as it seeks to expand.

“If you look at the credit market the buy now pay later segment is only scratching the surface,” he said.

McLean Roche Consulting’s Grant Halverson, a former Citibank executive, highlights the BNPL sector accounts for less than 1 per cent of the $1 trillion Australian payments market

“The challenge is you have to get critical mass in terms of retailers,” he said, noting that many bigger retailers had already been “picked off” by established players such as Latitude, Flexigroup and Afterpay.

Players in the US and Europe, including PayPipes and BNP Paribas’ Cetelem, are already providing white-label buy now pay later options in other markets.

While other buy-now-pay-later firms have rushed to list in the past four years, Limepay isn’t in a hurry to join the ASX but could seek a listing if its model gains more traction. It will kick off a second capital raising round for 2020 in coming months.

Mr Dwyer said he was more focused on building the Limepay model. “Once we can capture that story I think that could be a good time to list. Right now we are all about how do we innovate.”