Fatfish acquires BNPL Next Ltd to enter lucrative earned waged access market
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The deal will see Fatfish expand its BNPL offering and enter the earned waged access market in Southeast Asia, where employees can access their wages before payday.
Tech venture firm FatFish Group (ASX:FFG) has again expanded its reach in the BNPL market, and made its entry into the earned wage access (EWA) sector, after entering into a deal to acquire BNPL Next Ltd.
Australian-incorporated BNPL Next owns 60 per cent of Circopay, a company that pioneered the EWA solutions provider market in Southeast Asia and has plan to roll out similar in Australia.
Circopay’s EWA service gives employees the opportunity to access their wages that have been earned, to meet their short-term financial requirements that arise between paychecks.
This allows them to avoid having to turn to higher interest products such as credit cards, personal loans or payday loans. In most markets in Southeast Asia, where employees are usually paid their salaries at month-end, the EWA service will be an attractive offering.
Employers can use Circopay’s EWA solution to offer their employees early access to earned wages.
The process starts when the employee, at any time prior to payday, makes a withdrawal request.
When that request is received, Circopay will pay to the employee the amount requested, less a tiered fixed processing fee which is deducted upfront.
The full amount, including the processing fee, will then be recouped by Circopay from the employer on payday through payroll deductions.
According to Fatfish, this does not amount to an extension of credit to the employee, as wage withdrawals can only be made on the portion that’s already been earned but not paid.
The full amount is also recouped from the employer, not the employee, so effectively no loan agreement has taken place.
Research commissioned by Visa in the US has shown that many workers were living paycheck to paycheck, even before the COVID-19 pandemic.
These workers often struggle to manage their personal finances.
According to the study survey, an astonishing 44 per cent of employees in the US have less than US$500 saved for unexpected expenses.
In addition, 8 out of 10 employees said they would spend time at work thinking about or dealing with personal finances each week.
The survey also reported that more than 90 per cent of hourly workers wanted access to their pay before payday.
The COVID-19 pandemic has only served to exacerbate this already growing problem.
However, major service industry organisations have begun to recognise the issue, with companies like Walmart, Uber, McDonalds, Burger King, Domino’s and Chilis now adopting some form of an EWA program to help their employees.
With this momentum taking place, Fatfish predicts that EWA programs are poised to see robust adoption moving forward.
Due to the win-win nature for both employees and employers, Fatfish believes that in the near future, EWA and faster payroll are going to become the norm for employee benefits for many businesses.
The company also sees the latest acquisition to fit nicely with its strategy to invest in and build on emerging global technology trends in digital financing.
This is especially relevant to its existing plan to roll out BNPL services across Southeast Asia, where a large proportion of the working population have comparatively lower income as well as limited access to financial services.
In this regard, Circopay is poised to capitalise on its first-mover advantage on EWA services within the region.
Circopay also has an existing partnership with the Singaporean subsidiary of ASX-listed PayGroup Ltd (ASX: PYG), which gives it access to over 5,000,000 payslips covering more than 1,000 employers including the Victoria state government, Michael Page, Westpac, Electrolux and the Volvo Group.
The company has also partnered several other prominent international payroll solutions providers in Asia including Justlogin, Talenox and various other regional providers.
Fatfish will acquire 100% of BNPL Next at a total purchase consideration of $4.14 million.
The amount will be paid via the issuance of new FFG shares at an issue price that is equivalent to the 5-days volume weighted average price of FFG shares upon closing. 75% of the shares to be issued to vendors of BNPL Next Ltd will be subject to a voluntary escrow.
The acquisition will be subject to shareholders’ approval at a general meeting to be called soon.
From a trading range near 1c in early 2020, shares in FFG have now surged and are currently trading at 7.6c.
This article was developed in collaboration with Fatfish, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.