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- The buy now, pay later (BNPL) sector has transformed the Australian consumer credit market, but with it comes a new age of debt
- Small, low-cost debts with easy repayment terms may seem like no big deal, but new data from the Australian Securities and Investments Commission (ASIC) shows one in five consumers are missing their BNPL payments
- Credit Intelligence (CI1) is one of only a handful of ASX-listed companies operating in the debt management space
- What’s more, the company is leveraging the expertise and technology of its recently-acquired subsidiary, ChapterTwo, to create a groundbreaking debt management platform
- This platform will be designed to target BNPL debts through a ChapterTwo mobile app and customer portal
- The app will let consumers see all of their debts in one place and make gradual payments towards these debts without ever entering into any formal insolvency
- To keep the process simple, ChapterTwo will collect customer payments each month and disburse those payments to the appropriate creditors
- As a profitable company, the fundamentals of CI1’s business model are already in place
- Now, Credit Intelligence is waiting on the other side of the buy now, pay later mountain to help those who have bitten off a bit more than they can chew
The buy now, pay later (BNPL) sector has transformed the Australian consumer credit market with its promise of low-cost credit and easy repayments.
Companies like Afterpay (APT), with a market cap now over $40 billion, have helped an army of millennials enter into small, seemingly harmless debts. Debts that slowly build up. And debts that these BNPL users have no idea how to manage.
New players in the BNPL space are constantly popping up across the ASX as companies try their best to capitalise on what’s quickly become an oversaturated market.
But only a handful of ASX-listed companies operate in the debt management space — a space that will be in high demand when the oncoming wave of BNPL debt finally crashes.
Credit Intelligence (CI1) has noticed this upcoming gap in the market and is working hard to create an ethical and efficient debt management service specifically tailored for BNPL struggles.
Making molehills of mountains
While the idea of small, low-cost debts with easy repayment terms might seem like no big deal, consumers are clearly unwittingly taking on more than they can bear.
Recent research from the Australian Securities and Investments Commission (ASIC) suggests that one in five consumers are missing their BNPL payments.
In fact, in the 2018-2019 financial year, missed payments made up a whopping $43 million in revenue for the six BNPL providers reviewed by ASIC.
And this trend is even more worrying given the renewed explosion of BNPL over the COVID-19 pandemic.
“Buy now pay later arrangements are clearly popular as a payment method. While working for the majority of users, some consumers are suffering harm,” ASIC said in November 2020.
“There are regulatory changes coming that will impact the industry, with the design and distribution obligations coming into effect in October 2021,” the watchdog warned. And as regulatory changes are introduced to protect consumers from the current BNPL model, Credit Intelligence will be ready to help those already hurt.
The ChapterTwo app
Credit Intelligence will leverage the services of its recently-acquired subsidiary, ChapterTwo, to create the groundbreaking debt management platform.
The unique solution will transform the traditional debt management sector, which is rife with uncaring and unethical practices as debt collectors hound people for repayments.
Credit Intelligence’s service would operate differently: rather than take debtors through a court process and enforce recovery, the CI1 approach will be to freeze the debt and halt interest from growing. Credit Intelligence can then manage a performing balance sheet loan.
This will all be made possible through a ChapterTwo mobile app and customer portal.
ChapterTwo has already engaged a leading salesforce partner to build the platform, with plans for the app to be an industry first for debt restructuring.
The app will let Australian consumers see all of their debts in one place and make gradual payments without ever entering into any formal insolvency. The debts can be paid back over a five to seven-year term.
To make it as simple as possible for the consumer, ChapterTwo will collect the customer payment each month and then disburse those payments to the appropriate creditors — meaning the system is efficient and effective for those in financial strife.
“Credit Intelligence is a proven leader in managing debt in a different way, and we have decades of experience across Asia in making debt management a better process,” Credit Intelligence Managing Director Jimmie Wong said.
“We are growing, we are profitable, and we will leverage the unique insights we have gained into technology-enabled debt management to transform the experience of millions of Australian BNPL customers,” he said.
Importantly, Credit Intelligence said the arrangements between banks and ChapterTwo will generally be interest-free, meaning customers will be able to see their debt balances reduce over time as they make use of the CI1 and ChapterTwo services.
The fact that customers deal directly with ChapterTwo also means they avoid dealing with unforgiving banks and harsh debt collectors so they can maintain their dignity as they pay down their arrears.
A proven business
Credit Intelligence has already proven its prowess in offering consumers ethical debt management and payment collection services.
In fact, CI1 helped pioneer Hong Kong’s individual voluntary arrangement (IVA) procedure, which is an alternative to filing for bankruptcy.
IVA arrangements allow debtors to keep their jobs, act as a director of a company, and avoid the stigma associated with bankruptcy as they work to pay back their creditors.
And Credit Intelligence is making a profit while helping others.
The company made over $3.5 million in profit over the 2020 financial year, of which more than a quarter was returned to shareholders through two dividend payouts.
The fundamentals of CI1’s business model are already in place. Now, the company is waiting on the other side of the buy now, pay later mountain to help those who have bitten off a bit more than they can chew.
