Flexigroup humming in bnpl sector

flexigroup launched an innovative product in the increasingly competitive buy-now, pay-later (BNPL) lending space in August. Michael Malone, group treasurer, and Bianca Spata, head of group funding, at flexigroup in Sydney, give an update on the company’s strategy across its lending and funding products.

In Australia, flexigroup has taken the lead as an issuer of green securitisation. What is the status of this book and its funding opportunities?

SPATA We are really proud of the momentum built in the green asset-backed securities (ABS) space over the past few years. We have now issued A$272 million (US$183 million) of green bonds over four transactions and we have progressively tested appetite among different investors by issuing green notes down the capital stack. In our last transaction, which closed in March 2019, we issued down to a single-A rated green tranche – which was a first for the Australian market.

We continue to see strength in the solar industry and have experienced 17 per cent receivables growth year-on-year. While this has been largely in the solar PV space we continue to explore opportunities to build out our offering in other green asset classes, such as batteries. While a ‘green-only’ securitisation may be something we look at in the future, the broader growth we are seeing across other industries continues to support a mixed green and nongreen offering.

Where else, asset wise, do you see the best opportunities emerging?

MALONE In our FY19 results, we saw good underlying transaction volume and receivables growth in our three key areas of focus: credit cards, BNPL and SME lending. The launch of three new products – bundll, wiired lease and wiired money – announced in late August with our results will also support further growth.

SPATA As we continue to innovate from a product perspective, we will also continue to explore opportunities to structure more innovative funding platforms to enable us to access wholesale funding via bilateral or syndicated funding facilities as well as through capital markets.

How does bundll fit into flexigroup’s BNPL strategy?

MALONE In April, flexigroup relaunched its BNPL offering in Australia, consolidating the two legacy products into one new consumer-facing brand, humm. This is the only product in the market that can offer interest-free finance for purchases up to A$30,000. For FY19, volume growth was 6 per cent to A$574 million – a strong result.

SPATA In addition to the volume growth, 63,000 new customers have signed up since the humm rebrand and 5,000 new retail partners have been added to the platform. We would very much like to see the strong receivables growth translate into more frequent capital-markets issuance.

We see the new product, bundll, as a unique offering in the BNPL market. By teaming up with Mastercard, bundll has a much broader reach than the other BNPL products and will allow consumers to buy everything, everywhere and pay later with no interest. This product is expected to be launched to market in Q2 FY20.

A key focus of our revised strategy announced to market in February 2019 was to lead in BNPL. We firmly believe the humm and bundll products will allow us to do so.

flexigroup was exploring a credit-card master trust 12 months ago. Is this still an option?

MALONE In our FY19 results, we called out a commitment to bring a credit-card master trust to Australia this financial year and work has already commenced on this. This timing is supported by the good underlying growth we have seen in the Australian credit-card portfolio. Volume growth was up 10 per cent, to A$811 million, for FY19 and closing receivables were up 14 per cent, at A$739 million.

SPATA We are a seasoned issuer in the credit-card ABS market having just completed the ninth issuance under our New Zealand Q Card Trust programme. We are focused on using our experience from this programme in structuring and bringing the Australian credit-card master trust to market.

How important is it for an issuer like flexigroup to broaden its securitisation investor base?

MALONE It is very important. We are growing and with this comes the need and opportunity to find new investors to support our funding activities. A pleasing aspect of our engagement with capital markets is that we find investors are very keen to stay in touch with what flexigroup is up to, understand how we are innovating and see how this features within the transactions we bring to debt-market investors.