Many customers associate “Buy Now, Pay Later” (BNPL) with the ability to pay off a clothing purchase, for example, in multiple interest-free installments. It is also associated with growing concerns that the strategy makes it easier for younger adults to fall into debt after spending beyond their means.
But that's just one use case for BNPL, which are essentially small interest-free loans. There is a growing group of startups looking to expand the model BNPL extension to other categories that are arguably more important than buying a new Apple Watch. Qomodo is one of them.
Qomodo announced a €34,5 million ($36,9 million) pre-seed round that consisted of €4,5 million in equity and €30 million in debt financing. The round was led by Fasanara Capital with participation from Exor Ventures, Proximity Capital and Octopus Ventures, among others. The round closed in December 2022, but the startup did not announce the round because it wanted to remain secret, according to co-founder and CEO Gianluca Cocco.
The Milan-based startup offers digital payments and BNPL services to physical retailers (including veterinarians, car workshops and dentists) in Italy, who were largely unequipped to accept such digital payments.
Cocco said the company decided to focus on these areas because it wanted to give these types of retailers, which are frequent sources of large, unexpected payments for consumers, the structure needed to get customers to pay for these purchases without having to resort to a costly loan provider company.
“In our case, we are digitizing and doing a process to basically get an interest-free loan using the BNPL technique,” Cocco said. “But we are actually providing a service. “We are allowing families to face unexpected expenses.”
I really like this approach to BNPL for several reasons. Using these interest-free microloans for payments that people don't expect, or aren't budgeted for, can help prevent people from having to choose between going into debt, taking out a high-interest loan, or simply not fixing the problem. Anyone who has ever faced a potential unexpected €2,000 vet bill because their dog ate something at the dog park again knows this all too well.
While splitting a purchase that's not as big as, say, buying a house or a car is never actually a good idea financially, sometimes unexpected things happen. It is much better to have to pay for a car repair in installments than to not have access to your own vehicle.
It's good to see companies like Qomodo looking to use BNPL to ease the financial burden on people rather than some of the more traditional names in the space that largely fan the flames. And Qomodo is just the beginning.
Walnut is a company looking to bring the BNPL model to healthcare. Like Qomodo, Walnut is creating a digital payment service for medical providers that allows them to offer these interest-free loans to their patients instead of having a patient who can't pay for a procedure upfront pay for it through a debt collector. debts or give up treatment altogether for financial reasons.
Slope is a B2B-focused startup that allows the company's customers to order inventory or supplies in a slow season when they don't receive as much cash. That can help ensure they are well supplied when things pick up again.
Tabby, a BNPL focused on Middle Eastern consumers, announced a $200 million Series D round. The Riyadh, Saudi Arabia-based company is more like the consumer-driven BNPL structure in the United States, but still represents a further expansion of the business model because it brings the concept of credit to a mainstream market for the first time. Only 8% of adults in the Middle East region have a credit card compared to 75% of adults in the US.
Of course, all that being said, regardless of consumers everywhere who turn to BNPL for whatever reason, they should be held accountable for what they can actually afford. The fact that these microloans do not accrue interest does not mean that there are no consequences for those who cannot make their payments.
While consumers should be careful, being able to use these services for these critical issues is overwhelmingly positive. The demand for this BNPL expansion is clear and it doesn't look like Qomodo will be the only new entrant for long.
