Openpay sets its sights on a pre-Christmas ASX listing

Openpay ASX IPO listing OPY
Buy now pay later provider Openpay offers long repayment periods with interest free terms.

Melbourne-based payments technology firm Openpay has taken its first steps towards listing on the Australian Stock Exchange, this week launching an initial public offering to raise a targeted $50 million.

Underwritten by Shaw & Partners, the retail and institutional offering will allow new investors to acquire a total 31.25 million fully-paid ordinary shares in the “buy now pay later” provider at a price of $1.60 per share.

Proceeds will be used primarily to fund Openpay’s growth initiatives and include utilising working capital to support product development, talent acquisition and building on its recent entry into the United Kingdom.

Funds will also be used for continued enhancement of its technology platform and decisioning tool, and receivables growth through increased access to equity funding.

When the offer closes just before Christmas, new investors will hold 33.3% of the company while existing shareholders will hold 66.6%.

Openpay plans to trade under the ASX ticker OPY.

Household market

Established in 2013, the Openpay Live platform was originally designed as an instore digital solution for layby, purpose-built for retailers and their customers.

Following an initial launch within a small group of retailers in Australia and New Zealand, operations were soon commercialised for a broader range of merchants and formally launched in 2016 under the Openpay brand.

In the past three years, the service has grown to offer a flexible payments solution for merchants and customers across the four key household spend verticals of retail, automotive, healthcare and home improvement.

Openpay merchant consumer chart
Openpay’s benefits to both merchants and consumers.

Targeting these segments allows the company to attract a comparatively older customer base, often with higher average transaction values and considered to be “more financially savvy and lower risk”.

Interest free

Openpay partners with merchants to provide interest-free repayment plans in-store, in-app and online based on longer terms than its competitors.

Larger value plans are offered with a longer duration, while shorter-term plans are typically available for smaller value purchases.

The technology includes a proprietary origination and decisioning engine known as Automated Risk Management (or ARM) capable of assessing customer credit applications in less than 0.1 second and is designed to prevent fraud and other financial crimes.

Revenue generation

While the majority of its 1,754 active merchants are based in Australia, Openpay also supports accredited merchants in New Zealand and launched into the UK market in June.

The company currently has over 153,000 customers and more than 318,000 active payment plans.

Revenue is generated primarily from transaction fees payable by merchants – in the 2019 financial year, these fees contributed 51.8% of the company’s revenue and represented 5.9% of the year’s total transaction value.

Additional revenue comes from fees to customers including an ongoing plan management fee automatically included with each repayment and, for higher value purchases, an initial plan establishment fee.

In 2019, customer fees contributed 48.2% of Openpay’s revenue and represented 5.4% of the year’s total transaction value.