Fintech Fupay brings in BNPL for groceries and petrol, as the pay-in-four trend continues

Fintech scale-up Fupay has expanded its buy now, pay later (BNPL) products to groceries and petrol, as the sector continues to expand into new categories.

After expanding into rent last year, the local BNPL outfit has announced new partnerships in the grocery and fuel sectors with Foodworks, IGA Marketplace and United Petroleum.

The new moves in the BNPL space come amid continued global scrutiny of the sector’s customer protections, which has faced inquiries in Australia, along with the US and UK in recent months.

However, Fupay touts its service as among the sector’s most responsible, using “customer transactional data, machine learning and technology to provide users with a forward view of pay-cycles”.

Credit isn’t going away

Founder and managing director Michael Fredericks says the moves were focused on helping merchants address a younger consumer base that no longer uses credit cards but still required a credit service to manage money.

“Credit is part of a solution to managing money,” Fredericks tells SmartCompany, which will continue whether consumers use traditional credit or BNPL services.

“Credit isn’t going away,” he says.

“They’re trying to figure out how to work with younger customers that don’t use credit.”

Approximately 14% of Australian adults made a purchase using a BNPL service in the past four weeks as of June 2021 — up from 11% during the same period in 2020, and an estimated $10 billion a year flows through the local platforms.

The company claims its service protects users from the financial harm that can be caused by traditional credit by providing transparency on its platform to consumers on their spending habits, red flagging future cash flow issues, and encouraging saving.

This includes services built into its platforms including its app, Flow, which enables real time insights into customer eligibility for BNPL and personal loans. Another feature, SmartSpend, provides cash back rewards and switch-and-save options based on personalised spending insights.

Fupay, which also offers its white label service to banks and larger organisations looking to offer a BNPL product, operates with a holistic approach to credit, which he says has greater consumer protection built-in.

Fredericks says there’s a shift from what he calls “buy now, pay later 1.0” that was established to service the retail sector to newer models.

The ‘alpha version’ worked for retail companies with high margins, he says.

“But it doesn’t work for a whole bunch of other companies with lower margins like fuel and groceries.

Founder and managing director of Fupay, Michael Fredericks.

The company’s new partners said these additional layers of security were a significant factor in joining forces.

“Fupay offers a low fee structure to our customers, with a commitment to responsible lending,” director of marketing, partnerships & sales at IGA Marketplace Raelene Hopper said in a statement.

“Fupay’s vision to be Australia’s first responsible spending and lending app was a key driver for this partnership,” she added.

Judith Russell, chief operating officer at fuel retailer United Petroleum said the partnership would enable it to offer the payment service across more than 350 United service stations nationwide.

2021 saw an explosion in the use of BNPL services in Australia, though the sector is still dwarfed by traditional credit services.

In July the company launched FuRent, which lets tenants who fit responsible lending criteria by spotting them cash to pay their rent on time and avoid falling into arrears.

The move comes amid an expansion in payments services across the board, as emergent fintechs continue their march to challenge the big banks; in September Zip launched a new payments service that expands its BNPL offering to businesses.

Scrutiny around customer protections in unregulated sector

Amid growth — and as younger generations increasingly eschew credit cards — the BNPL sector is facing growing scrutiny globally around the threat of indebtedness by payment service users, along with a lack of transparency around their practices.

In December the US Consumer Financial Protection Bureau (CFPB) announced firms including Australian fintechs Afterpay (now owned by Jack Dorsey’s Block) and Zip would be forced to hand over information to the financial regulator, in the strongest regulatory move yet in the fast growing sector.

The UK’s financial regulator late last year said BNPL credit deals offered by fintechs including Klarna and PayPal must be covered by its rules “as a matter of urgency”, because of a “significant potential for consumer harm”.

Australian Treasurer Josh Frydenberg on December 8 announced a comprehensive shake-up of payment regulation, including an overhaul of rules governing BNPL providers.

Because BNPL services do not currently come under the Payment System Regulation Act as designated payment systems, the government plans to use findings from Treasury’s Payments System Review to develop targeted rules to ensure more oversight around fees and to promote competition.