The Secret Broker: The real origins of BNPL exposed... it were us!

After 35 years of stockbroking for some of the biggest houses and investors in Australia and the UK, the Secret Broker is regaling Stockhead readers with his colourful war stories — from the trading floor to the dealer’s desk.

Back in the 80s, if you wanted to raise some money for an idea you had, it was a lot harder than today.

You needed an idea that you could put a patent on and have some protection from others copying it and to get a patent. Everything had to be manually presented.

The first question from any potential investor was always ‘have you got a patent?’

Patents can take a long time. So no patent + no patience = no money.

I was lucky enough to have a few clients that had done the hard yards, made good coin and were always happy to back someone else’s idea.

We would get approached all the time from a friend of a friend who had an idea. Having these clients enabled me to ‘two minute’ shuffle those people out of my office and palm them straight on.

This tactic would always give me a shoe-in if their idea ever became something, but 99% of the time they would just fizzle out.

One of these clients made an absolute mint out of cleaning office windows. He’d had an accident and was hospitalised for a few months and as he lay in bed, he could see out of the window and across the road to a large office building.

One day, this office had the window cleaners in and he could see them dangling down, holding a bucket and sponge. He winced as they dropped those buckets and sponges on the people below, whilst swinging in the wind and the elements. He thought there has to be a better way.

So whilst in his hospital bed, he invented a way to harness-hold all the loose bits.

When he recovered, he used his much-safer invention to get government contracts to clean their windows.

When he became a client of mine, he was in his 70s and if someone came to him for start-up capital, he would fund them for 70% of their idea. Most baulked at this ratio, but he would tell them “I have the money and the knowhow and 30% of something is better than 100% of nothing.”

Fast forward to today and the internet now gives you lots of ways to raise startup capital. Some don’t require giving up any equity.

You can forward sell an idea, by building a prototype and crowdfunding it.

Some great ones come to mind, like the peanut butter pump. No more scraping the bottom of a jar.

Or the bee hive with a tap, that poured the honey straight into a jar, no smoker or suit required.

flowhive

However, these are all physical things and today the world is full of apps and software. Being strings of code, it makes a patent application nigh impossible.

Turning air into money

Actually, in 2017, the founders of AfterPay did lodge a patent application.

It obviously didn’t mean that much, as there are now 20 competitive companies offering variations on BNPL. An idea for turning layby into something electronic obviously cannot be patented.

Anyway, for those who have nothing better to do this weekend, here is their patent.

And for all you lucky holders who are living it up large, don’t fret – Nick and David did the right thing and assigned their application over to AfterPay.

All they can really claim though is first mover advantage, as the other 19 wannabes simply came up with different variations.

But I nearly choked on my mug of tea last week when a new upcoming IPO popped up called – wait for it… why didn’t I think of this…

Why do all that – ugh – *waiting* for pay?

That’s right. BeforePay.

And yes, they’re about to put rubber to the road and raise some pre-IPO capital.

This got me thinking about why no one has come up with WombPay yet. Imagine – all the things the parents need to buy for their upcoming arrival, paid for via installments from the child’s pocket money and tooth fairy rewards as they come of age.

Don’t worry about them arriving in the world debt-free, hock them up before they even arrive. And we can be the very first phone app that they need!

Brokers are people too

Mind you, we thought of all this BNPL thing in 1990, when working at a merchant bank.

They employed us for our brains, so it was only fair to use them.

We would go to HR with some cock n’ bull story, like a family member who was dying and needed an expensive life-saving operation. Could they please loan us our upcoming bonus, so we could pay for it?

After the HR manager had wiped away her tears, she would approve this “very kind” act to the accounts department. The next day, bingo! Bonus in the bank, six months early!

I don’t think she ever thought that a banker or broker could ever display empathy and we had proved her wrong. Wrong-ish.

It took three years of tear-producing stories for her to realise that every year, she was actually paying us our bonus, tax-free.

When bonus time came around, she just wrote off our loan by internally cancelling our bonus payment. It never got washed through our wages account and taxed.

If only we had patented this idea, we could now be billionaires with our Bonus Now, Pay Lost scheme.

BonusPay, coming to an app store soon? Now that’s what I call cleaning up!