Like Afterpay, but for everything else: Sydney fintech Beforepay bags $4 million

Aussie fintech startup Beforepay has raised $4 million for its product bringing a whole new vertical to the booming Australian buy-now-pay-later (BNPL) sector.

Launched in January this year, Beforepay is an app that allows people to access a portion of their wages on demand, before their paycheck comes through.

Customers can get their hands on an advance of up to $200, through an app that syncs up with their bank account. When their wages land, the advance is automatically repaid, plus a 5% fee.

The round was led by James Spenceley, Airtasker chair and the founder of Vocus Communications.

Speaking to SmartCompany, Beforepay co-founder and chief Tarek Ayoub says Beforepay fills a gap in the market that services such as Afterpay and Zip miss.

Rather than purchasing from a merchant that offers a BNPL service, customers can use Beforepay for anything else — think Netflix and Spotify subscriptions, or bills and even groceries.

According to Ayoub, 60% of Beforepay customers use BNPL.

“They use us for everything else that BNPL does not offer.”

Ayoub has dubbed this ‘pay on demand’, as opposed to another BNPL offering.

“I believe this is probably a new industry vertical,” he says.

“It’s tied to income rather than spending, so it has a differentiating factor.”

Growing up too fast

Having gone live with the offering at the beginning of this year, Beforepay had strong early traction, racking up some 20,000 users in a matter of weeks.

Of course, in March, the COVID-19 crisis hit in Australia, and Ayoub decided to put a halt on marketing, “being the prudent CEO that I am”.

But, the cat was out of the bag and word was spreading. Between March and May, the number of new customers joining the platform continued to grow by 10%, month-on-month, without any marketing investment.

Once the co-founders saw the economy was starting to stabilise, they “put the pedal to the metal again”, and increased their marketing efforts.

Today, the Beforpay app has more than 100,000 registered users. New user originations are increasing at a rate of about 20% week-on-week — with revenues growing in kind.

This was a large factor in why it was time to raise, Ayoub says.

“We couldn’t cope with the demand we were getting,” he says.

“We were growing at a faster rate than we could deploy our capital.”

Of course, this is also a sector that is on fire at the moment. The COVID-19 pandemic has seen Afterpay’s share price shoot to historic levels, while competitor Zip is also booming, although on a slightly smaller scale.

Both Afterpay’s Nick Molnar and Zip’s Larry Diamond made their debut on the AFR’s Rich List this year.

The past few months have also seen a slew of new entrants raising capital for BNPL tech for different sectors or consumers, as well a boom in fintech investment more generally.

For Beforepay’s part, this round was open and closed within nine days, and oversubscribed by more than 200%, Ayoub says.

“We saw it was a great time in the market,” he adds.

Cheq yourself

This funding round also follows the announcement that Beforepay has rebranded, less than a year after it launched.

Initially, the startup was launched as ‘Cheq’.

That was, of course, a play on words, related to the paycheque element of the business model.

But, it didn’t quite resonate with the startup’s users, Ayoub explains.

“A majority of our user base are millennials,” he says.

“They’ve never received a cheque in their lives … they don’t even know what that means.”

The team went back to the drawing board, to find a name that made sure the brand resonated with their target market, he says.

And because the business was a matter of months old, “it was now or never”.

Now, Beforepay pretty much does what it says on the tin, Ayoub says.

And, of course, it helpfully mirrors Afterpay, one of the biggest brands in this sector.

That was no accident, the co-founder admits. It was about framing the business as similar to Afterpay, but with one big difference.

“We’re a bunch of strategists here,” he laughs.