The ASX’s red-hot buy now, pay later space has shown no signs of cooling off as a seventh instalment payment company popped during its ASX debut today, while another waits in the wings.

Shares in New Zealand’s Laybuy began trading at noon up more than 50 per cent under ticker code LBY, while Sydney fintech Limepay has been wooing investors and retailers with its own merchant-branded BNPL platform.

Auckland-based Laybuy chief executive Gary Rohloff told Stockhead in a text message that he was “very happy (and humbled) by the market’s reaction today”.

“This is an exciting time for our family and the entire Laybuy team,” he wrote.

Laybuy shares were trading between $2.03 and $2.30 by mid-afternoon — up 43.9 to 63.1 per cent from its IPO price of $1.41 a share.

While Rohloff had once hoped to be in Sydney for the company’s ASX debut, with international travel shut down, the exchange threw the company a virtual ceremony on Monday — also his son and business partner Alex’s 24th birthday.

In just three and a half years, the company has gone from being launched from the family’s kitchen table to employing 65 people, operating in three countries and debuting on the ASX, Rohloff said in an interview on Friday.

“It’s a pretty proud moment for our family and our team,” he said.


A $369m market valuation

The company reported over 470,000 active customers and more than 5,600 active merchants on its platform as of June 30, and views itself as the dominant BNPL provider in New Zealand. It also operates in Australia and the UK.

It reported a $16.1m loss in FY20 on $13.8m in revenue.

Laybuy’s initial public offering raised $40m, with existing shareholders selling down another $40m in equity.

At its last traded price of $2.12, the company has a market capitalisation of $369m.

Rohloff is retaining a 26.8 per cent stake in Laybuy, with NZ-based Pioneer Capital executive director Craig Styris holding a 22.6 per cent stake.

On Friday, Rohloff told Stockhead he wasn’t making any predictions about how Monday would go.

“I guess at the end of the day, once you list on the public market, the market dictates your fate,” he said. “That is not something we can control, obviously.”


Six payments versus four

Laybuy’s prospectus notes that growth in the BNPL sector, coupled with relatively low barriers to entry, has seen a rapid increase in the number of new providers.

One primary differentiator is Laybuy’s payment schedules, the prospectus says.

Laybuy customers repay purchases over six weekly payments, while Afterpay (ASX:APT) customers repay theirs in four fortnightly installments.

Shares in Australia’s BNPL sector faltered last week after Paypal announced it would launch its own flexible payment offering, Pay in 4, in the United States by the holidays.

Rohloff said he wasn’t too worried about that, however.

“I look at the success that Laybuy has enjoyed in New Zealand, the success we’ve noted in Australia, and the success we’re enjoying in the UK,” he said.

BNPL operators have only captured 1 per cent of the market, Rohloff said.

“I think there’s plenty of room left for players who are willing to play, who have a great product and who love their customers, and that’s what we’re striving to achieve,” he said.


Limepay’s white-label BNPL offering

Limepay, meanwhile, closed an oversubscribed $6m funding round in May and in July signed up as a partner Australia’s largest hotel operator, France-based Accor, whose brands include Sofitel, Swissotel, Grand Mercure and ibis.

Founder and chief executive Limepay Tim Dwyer and chief revenue officer Dan Peters told Stockhead during a Zoom call on Thursday they had nothing to announce regarding a possible ASX listing just yet — but they were happy to discuss what makes their white-label offering different from others in the BNPL sector.

“The space is rapidly changing, and it’s changing the whole traditional credit space, which I think has needed a change for a while,” Dwyer said.

“When you zoom out, we are the only company that’s truly focused on that brand and that customer experience and connection.”


Payment marketplaces

Businesses using Limepay don’t need to redirect customers onto a third-party platform like Afterpay’s app that could include advertisements for their competitors, Dwyer said.

With Limepay, “rather than referring their customers back to a payment marketplace, and therefore diluting the lifetime value of those customers, they’re actually able to maintain them and still offer them the ‘pay in four’ functionality that they like.

“This is kind of basic marketplace economics, right? Participate in the marketplace, you gain customers, but you also give customers back to the marketplace.

“Other buy now, pay laters haven’t really articulated yet that proposition, but it’s being felt by merchants who have got 30-40 per cent of their business now going through one payment channel that is retargeting their customers to their competitors.

“That is a new thing, and it’s come out of nowhere, and a lot of retailers and merchants are only just starting to feel and wake up to the downside of that.”

Peters said in the short term, the marketplace was great for customer acquisition, in that you definitely get access to new customers.

“You turn on another buy now, pay later, you will get new customers,” he said.

“The question is, how profitable are those customers in the long run, and what does it do to your overall net margin as a merchant or retailer, in the long run? How does this play out? Can you sustainably grow your business in that way?”

Peters called third-party buy now, pay later operators “a fundamentally flawed short-term model”.


Different demographics

And while BNPL operators like Afterpay and Klarna advertise heavily to the millennial female demographic, there’s a bigger audience out there for flexible payment options, Dwyer said.

“The marketing doesn’t talk to me, or my friends, or my peers,” Dwyer said.

“It’s something that none of the others have shown much love to, because they’re not marketing to those people.”

Still, so far Limepay only has around 100 merchants on its platform. As of June 30, Afterpay had 55,400 merchant partners, Zip Co (ASX:Z1P) had 24,500 and Laybuy had 5,600.