Buy now, pay later (BNPL) has been one of the fastest growing segments of Europe’s consumer credit industry over the past three years, enabling people to spread the cost of purchases – but also attracting criticism for encouraging excessive borrowing. However, Dutch BNPL lender in3, which is today unveiling an $11.1m Series A fund-raising, says its model is carefully aligned with more sensible borrowing.
“Our business model does not depend on consumers over-extending themselves,” insists Hans Langenhuizen, the company’s CEO. “In fact, if we are exposed to too much over-crediting, it will kill our business.”
Like other BNPL providers, in3 enables consumers making purchases at participating retailers to spread the cost of their spending. In in3’s case, the customer pays the upfront cost of the purchase in three instalments over 60 days – a longer period than most providers offer. Consumers themselves pay no interest charges or fees to make purchases in this way; instead, in3 makes its money from retailers who pay fees when their customers use the lender’s services.
“Our founding team was part of the early wave of the BNPL movement in the early 2010s; it quickly became a crowded market, so we stood back and took a fresh look at the BNPL model and saw several limitations in all of the available products,” Langenhuizen says. In particular, customers were required to repay loans very quickly, forcing them to take more traditional loans out for larger purchases, which then required credit checks and recording.
“in3 was our honest approach to offer BNPL to consumers without costs,” Langenhuizen says. “Because of the term of 60 days, a registration in the credit registers is not required; this gives the consumer the possibility to buy what they want instead of compromising on quality products.”
One criticism of the broader BNPL industry has been that it can be in lenders’ interests to encourage consumers to take on more debt than they can manage, because late payment fees and high interest charges often kick in on loans not repaid on schedule. However, in3 sells its non-performing loans at a discount to third parties such as debt collection agencies, so cannot make money this way. “We have to keep our non-performing loans at very low rates to remain profitable,” Langenhuizen adds.
Another differentiator for in3 is its customer acquisition strategy. While most BNPL lenders look to sign up retailers one by one to their services, in3 focuses on deals with payment service providers (PSP), which then take responsibility for pushing adoption across their retail customer bases.
This model has seen the business grow rapidly, with 300% year-on-year revenue increases since 2018. But its latest PSP partnership, with the global payments company Worldline, could accelerate that growth trajectory.
in3 CEO Hans Langenhuizen
in3
The deal with Worldline, announced today alongside in3’s Series A round, is potentially transformative, Langenhuizen says, since the company serves 11 times’ as many retailers as any of its existing PSP partners. Several leading Worldline retail customers are already in discussions about offering in3’s BNPL facilities, he adds.
That reflects growing interest in the BNPL model throughout the retail industry. While lenders initially focused on sectors such as fashion, often targeting younger customers making lots of smaller purchases, in3’s model is more suited to an older demographic making larger purchases while budgeting carefully – on car repairs, say, or a new washing machine, or furniture for the home. Current retail customers include Kwik Fit, EP, La Souris, Matt sleeps and Dekbed-Discounter.
The Dutch BNPL payment market is expected to grow by almost 75% in 2022, reaching $7.6bn as more businesses move online. But Langenhuizen also sees the company growing more rapidly in other ways. It has recently launched a BNPL service offline that enables retailers to offer its product at the point of sale in physical retail outlets as well as for e-commerce. In addition, the company is planning a launch into the German marketplace.
That expansion will be supported by the additional financial firepower that today’s fund-raising will bring. The $11.1m round is led by Finch Capital, which emphasises the business’s strong technology as a key attraction.
‘’in3 has demonstrated a steady and consistent growth trajectory due to its strong technological capabilities and management, which has enabled it to provide BNPL to Dutch consumers through integrations with payments providers,” says Radboud Vlaar, managing director of Finch Capital.
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