Listen to this episode here: Be Extremely Resilient

Welcome to our blog for TALKING NUMBERS with Paul Jansz. In this article, we share our conversation with the Global Chief Executive Officer of BizPay, David Price. BizPay helps grow businesses, improve cash flow, reduce costs and increase sales by allowing business clients to pay in 4 interest-free monthly instalments.

The Rapid Growth of BizPay

It’s only been 18 months since BizPay went from a small start-up with four founders to an organisation with more than 60 employees. David had to do many hands-on jobs in operations and administration from the start but he tries to focus on the core competencies, such as raising capital, designing the short term and long-term strategy, and making sure the product is market-fit from a strategic perspective. So far, they have raised approximately $35 million.

David Price shares that their client base experienced rapid growth too. As they continue to professionalise their product, there are many referrals from clients and partners to new clients.

David and his team are looking at the next round, most likely to be an IPO. They hope IPO can bring a capital of around $100 million.

The Reason Behind Growth

David introduces for a business of a young age, the amount of capital they have raised, the target of IPO size within the timeframe is quite unusual in Australia. He says, firstly, it’s because that the pandemic supercharged the technology sector last year. However, now we can see a movement for capital to back from the tech sector to the resource sector.

David points out that AfterPay has been the big winner with a huge amount of capital being pointed at that sector. However, the business-to-business side is still in its infancy, and there is no overlap with AfterPay’s business-to-consumer market. There is very little competition and there is a big opportunity, which is the second reason for their fast growth.

The Pain Point: Cashflow

The cash flow issue is always a top-three concern for small to medium businesses.  BizPay’s model helps them to pay off their professional service invoices in instalments. Each time they do a transaction, it’s in the 10k range. With this size of the transaction, it adds up exceptionally quickly. The major constraints on BizPay are access to capital. A core function of the business ongoing is raising equity and debt capital just to service all the demand. David and his team had to strengthen the balance sheet through a big equity position, and it’s very difficult for a young business, no matter how good the track record looks.

This model also enables SMEs to use professional services providers such as law firms, accounting firms, management consultants, recruiters, etc. These types of professional service providers’ invoices are reasonably large and lumpy and would affect SMEs’ cash flow and affordability.

The Game of Setting it Right

How to set up the frequency and repay period is another optic. David takes Harvey Norman as an example. They have Zip, and they have the in-house payment programme, which is a five-year programme. From a financial point of view, that doesn’t make any sense. Why are people choosing two months interest-free option instead of the five years interest-free one?

However, people need to make a big commitment to sign up for the 5-year programme. It is very inconvenient to get all the financial information documents required to sign up. When you see another way to pay, which is much more convenient and easier to commit, you will choose it.

David says it’s a very interesting process. They structured BizPay with four instalments because it’s very easy for people to divide $20,000 by four than by three.

Bank’s Reaction

David says that now the banks are threatened by the ‘buy now pay later‘ players. Because for the first time in history, the credit card utilisation rates have dropped year on year. At the same time, the ‘buy now pay later’ growth is phenomenal, AfterPay picked up 6 million users in one or two days in the US, and it is the largest referrer for merchants in Australia after Google.

All of the Big Four have engaged with some of the BNPL players. The Commonwealth Bank is quite an interesting one, because they are playing the game with two hands, they’ve invested in Klarna, and is launching their own platform. There will be more innovation in this space, David says.

The Unique Point

David says BizPay is another way to pay, which is a payment product, not a financing product. Hence, they don’t ask for financial information when businesses sign up. They just take the company’s ABN, and run a credit check with the services like Equifax and Illion.

However, there is not always services available, and the information they get from these services is not always sufficient. David and his team are working very hard on building a credit risk engine based on artificial intelligence that will help them make decisions based on alternative data points. Some tentative data points can be what device is the person applying on, or what time is this person buying.

A Piece of Advice

David says that entrepreneurs need to be extremely resilient. He emphasises that things always go wrong, even in the best journeys. Even like AfterPay, they had massive issues with the regulator. Sometimes things just don’t work. When it happens, you have to get some feedback from the market, work on your products and act very quickly.