“Buy now, pay smarter”: The new Openpay CEO on the potential of new payment technologies
CEO Michael Eidel believes Openpay can reshape consumer cash flow.
After a period of relative dormancy, the payment technology sector is having something of a renaissance, according to Michael Eidel. "Payments in general has been a very boring business for a long period of time, but over the last five years, we have been seeing a tremendous uptake of great customer propositions on the back of technology."
The former head of cash flow and transaction services at the Commonwealth Bank, Eidel now finds himself at the vanguard of the payments revolution as CEO of buy now pay later provider Openpay.
In the wake of the banking royal commission, Eidel found himself at an institution willing to reform, but lacking the pliability to do so. "It's not that people do not want to, it's just incredibly hard to change such a big ship within a reasonable period of time," he told Finder. "We found it incredibly hard at times to execute on our promise due to legacy."
Now at Openpay, Eidel believes he is in a position to better shape the future of this brave new world of payment technology. "Being the CEO gives you the opportunity to drive culture and drive business focus and strategy better than in any other position, and I found that really refreshing."
"We're a tool to smooth out cash flow"
Despite being founded in 2012, ancient history by the standards of the buy now pay later space, Openpay has only started to commercialise and scale in the last year. Instead, the company spent years developing their underlying platform, and this is what piqued Eidel's interest.
"I was attracted by the fintech space in general, and by Openpay more specifically, because first of all I liked the concept of a technology platform which you can take to create commercial products and great customer experiences. Buy now pay later is only the first visible extension of our platform into a product and into a market. We can do much more, and that has made the payment and lending space very interesting."
While the buy now pay later space has developed a reputation as a quick source of credit, Eidel believes its value lies more as a cash flow tool for consumers. As such, Openpay is targeting a different type of customer. "We are not primarily a source of funding and credit for our customers. We're more a tool to smooth out cash flow, and a budgeting tool for people who earn their own money, who maybe have a family, and are looking at responsible spending on their home, car, travel, or their lifestyle more broadly. We're not an instrument for someone who may just need a bit of money until their next salary payment."
Compared to rivals like Afterpay and Zip, Openpay offers longer payment plans up to 36 months, with limits up to $20,000. Openpay customers also have the ability to change their instalment schedule as they need, without having to pay additional fees. Like the rest of the buy now pay later sector, Openpay does not charge any interest, but does charge a management fee or establishment fee on some payment plans.
Unlike some of its competitors, late fees make up only 12% of Openpay's revenue stream, a point of difference that Eidel believes illustrates its approach to consumers. 75% of Openpay customers also cover their instalment plan payments using a debit card, as opposed to a credit card, according to Eidel.
"Ultimately we can can become a digital bank"
While buy now pay later services remain at the core of Openpay's business, Eidel envisages a much broader scope for its underlying technology. "We have a fraud mechanism which works really, really well. So we can take data and move it within a second for the consumer at the point of sale, in store and online, to get a credit decision instantly with a very low failure rate. It also tells you something about the quality of the risk and decision engine which sits underneath what we expose to the merchant and the consumer. I find this very, very powerful, and ultimately we can become a digital bank, if you like."
"Our philosophy is we do not want the customer to come to us like they would traditionally to a bank branch. We want to be where the customer is and we want to be an embedded part of their lifestyle. If they are shopping or travelling, dining or chatting with their friends, we want to be there. We also don't want to be an additional click, if you like, we want to be embedded in their experience: smooth, easy and helpful where they need us."
Openpay hopes to entrench itself in the customer's life, not just at the point of payment, but by providing holistic support throughout a customer's payment journey. By targeting the dental and medical industries, home improvements and automotives, Openpay sees itself as a facilitator in helping customers manage ongoing expenditure, not as a source of cheap credit.
A merchant vessel
Eidel also emphasises the symbiotic relationship between provider, consumer and merchant that underpins the buy now pay later space. While the majority of Openpay's revenue comes from fees charged to merchants, according to the ASIC report into the buy now pay later industry, merchants directly benefit from the information that is collected by Openpay's platform.
"We accumulate data and give insights back to the merchants and to the clinics in these industries, obviously not about individual clients, given product data privacy and confidentiality, but more trends and patterns. And this is what, with our platform, our algorithms can do really well. Merchants increasingly appreciate when we come back with our monthly report, which helps them to position themselves better to their customers."
Openpay payments also led to a marked drop in the return rate of purchased items, which Eidel believes is further evidence of Openpay's utility as a budget management tool, and not as a quick source of credit.
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