There’s a new player in the fintech lending space, with a tongue-in-cheek name that is no doubt a brazen dig at the prolific Afterpay (ASX: APT). 

I’m talking about Beforepay, the platform that lets you access your wages early, for a set fee. Less: buy now, pay later. More: wage advance, buy now, with fees…not as catchy. 

The product offers a different way to manage personal finances, giving easy access to credit as more and more people move away from traditional credit cards.

Founded in 2019 and launched in 2020, the platform has already had some success, with a compound monthly growth rate of 25.3% in their active user base.  To date they have advanced over $170 million in wages. Each wage advance incurs a fixed 5% transaction fee, which is where Beforepay derives their revenue from, totalling an income of $4.5 million and a net loss (after tax) of $19.6 million. 

Given the limited time the product has been on the market, these numbers are somewhat impressive. Not to mention that their entire operating history since launching their commercial product in 2020 has taken place during a global pandemic. One has to wonder though if the pandemic aided in boosting active users as stuck-at-home-Aussies propelled e-commerce forward the equivalent of ten years, all from the comfort of their living rooms. 

Seeking to push their product further, the Company is now looking to make its ASX debut, raising $35 million, at $3.41 per share giving the Company an indicative market cap of $158.4 million at the offer price. 

An estimated 5.3 million of the 9.5 million adults aged between 20-54 who are employed in Australia could benefit from short term, non revolving access to their wages. The current active customer base sits at over 125,500 people and is widely diverse, which speaks to the broad appeal of the product. The same body of research found that 24% of millennials were unable to raise $2,000 in a week. 

Competitors in the space are other Pay on Demand service providers such as MyPayNow, EverydayPay and WageTap. 

Whilst the Company’s prospectus cites numerous barriers to entry preventing more from entering the sector including investment in marketing and technology know-how, these entry barriers are likely to be less significant to players already offering financial services to the market. 

Competitors aside, Beforepay is facing some other challenges. Market commentators have chastised the platform as predatory, looking to benefit off a “customer base on a significant chunk of Centrelink payment receipts”. Operationally, the fintech is playing in risky waters when it comes to actually getting its money back. The last financial year saw write offs exceed the interest charged to customers ($5.4 million to $4.5million split). Those write offs also ballooned out past their revenue. 

In readying to list, the Company has lowered their loss margin following a change in lending policies, being more selective of who gets cash. Still, the financially vulnerable people that are most likely to use these services still pose a risk to investors and the company. 

The Company is well funded with $50.7 million in the bank as at June 30th 2021. 

Beforepay is set to commence trading on the ASX on Monday 17th January under the proposed stock code, B4P.