Zopa acquires BNPL company DivideBuy

The fintech specialising in business lending signs its first ever acquisition following a £75m fundraising round, with this UK fintech specialising in point-of-sale (POS) BNPL for individuals.

FACTS

• DivideBuy allows merchants to offer their customers interest-free payment options for larger purchases between £250 and £30,000.

• Shoppers can spread the cost of their purchases over a period of 2 to 12 months and has over 400 partnerships with UK merchants.

• Zopa ushers in the era of BNPL 2.0, an evolution marked by the imminence of regulation:

  • Providing affordable credit by conducting credit checks and affordability assessments for all customers

  • Sharing data with credit rating agencies (CRAs) to give other lenders a full picture of customers' debt situation

  • Helping customers to better consolidate, structure and repay their debt through its inclusive tools

  • Enable users to create their credit profiles and improve their financial situation.

• Zopa also said it expects to achieve annual profitability this year and is considering a possible listing in London.

CHALLENGES

• Taking advantage of a buoyant market: The integration of DivideBuy is expected to increase Zopa's revenue by at least 20% over the next few years. The BNPL payments industry in the UK has experienced strong growth over the last four quarters, supported by increased e-commerce penetration. BNPL payments are expected to grow by 20.1% on an annual basis to $32.8 billion in 2023.

• Seizing the regulatory opportunity: DivideBuy and other BNPL services operating in the UK are expected to face increased regulation from the Financial Conduct Authority, with a BNPL Industry Bill published by the government this week. Our BNPL 2.0 offering will combine fintech technology and innovation to enable instant decisions and fully integrated consumer journeys with the consumer protection, credit checks and guarantees of a regulated bank.

MARKET PERSPECTIVE

• Zopa began life as a peer-to-peer lender before becoming a digital bank. Zopa Bank announced that it broke even 21 months after obtaining its banking licence (in the summer of 2020) and actually launching its operations. The FinTech has managed to lend over £6 billion via its peer-to-peer lending since 2005. Its diversification into savings and day-to-day banking has seen it capitalise £1 billion in deposits.

• In the UK, BNPLs are being offered by a growing number of fintechs - with Klarna being one of the largest - The eight-week consultation, which began on Tuesday 14 February, aimed at ring-fencing players in this market, comes two years after the government announced its intention to tighten the rules on the use of BNPL products and bring them within the scope of Financial Conduct Authority (FCA) regulation. Some players such as Klarna have started to cooperate with the regulator. Others, such as DivideBuy, will take advantage of partnerships or takeovers to overcome this new challenge.