Buy-now-pay-later operator to use Mastercard network

GenoaPay has signed a deal with Mastercard which will open up more retailers to buy-now-pay-later shoppers. Photo / Michael Cunningham

A buy-now-pay-later provider says its move to piggyback off the Mastercard network will be a game changer which opens up massive growth opportunities for it here and in Australia.

GenoaPay owner Lattitude Financial Services has done a deal with the card services operator that will mean everywhere Mastercard is accepted consumers will also be able to use GenoaPay's 10-week instalment plan.

Up until now it has been up to individual buy-now-pay-later companies to sign on retailers resulting in some retailers offering multiple BNPL options. Consumers can then only use a provider affliated with that retailer.

David Gelbak, chief country officer for New Zealand said: "At the moment when you take out a buy-now-pay-later plan it is pretty episodic. There is one brand offering X and another brand offering a whole range of options."

Gelbak said its partnership with Mastercard would help remove the friction from the process.

"I think this is really significant for us. This is the new generation of what buy now pay later looks like."

GenoaPay is the first operator to pair up directly with a card services company in New Zealand and it plans to launch the service in the first half of next year.

If the New Zealand trial is successful it will expand it into its much bigger market of Australia.

"It's going to be a first to market in New Zealand and we will use that as a learning experience."

Both Australia and New Zealand have seen buy now pay later take off quickly.

Research by New Zealand Post on the phenomenon this year found the deferred payments schemes had experienced a "staggering rise" and are set to keep growing.

It revealed that more than 228,000 Kiwis had already signed up to a buy-now-pay-later scheme, and they are particularly popular with female millennials.

More than one in 10 online shoppers had used such a scheme, 70 per cent of the users were female and 80 per cent were under 45 years old.

Consumers don't pay interest on the part-payments but can be stung by penalty fees if they miss a payment.

Gelbak said the schemes were initially predominant in the fast fashion industry which is the reason female millennials were high users but has now become mainstream.

Experts says the product appeals to a generation that grew up around the GFC and doesn't like debt and credit cards.

Consumers have the options of paying for the installments using a debit card, credit card or loan, and Gelbak said its users in the main paid by debit card.

The biggest cost is to retailers who pay between 3 and 5 per cent of the purchase price for using the service, although providers argue the cost is worth it as it boosts sales for retailers.

David Gelbak, NZ country manager for Lattitude Financial Services. Photo / Supplied

Gelbak wouldn't detail its charges to retailers but said it offered a competitive rate and would continue to do so under the new arrangement.

Consumers won't need a physical card but will have a "virtual" card in their Apple or Google wallet that they can use to pay by tapping their phone onto the terminal.

The digital sign-up process can be done in minutes and includes a credit check and as well as meeting anti-money laundering requirements. Consumers can borrow between $150 and $1000.

GenoaPay currently has around 1700 brands signed up with around 100,000 customers.

Gelbak said the key to driving customer usage up was the number of retailers and the Mastercard deal would allow it to broaden its reach massively.

Next year it also plans to launch its travel credit card 28 Degrees Global Platinum Mastercard into New Zealand. The card offers no international transaction fees and no currency conversion fees, making it attractive for online shopping at overseas-based retailers and for use while travelling.

Gelbak said the card had been in Australia for around nine years and was highly popular.