Blue Label bets on buy-now-pay-later model for growth

Blue Label Telecoms is joining a growing list of companies betting on the buy-now-pay-later business model for their future earnings.

The model, which is offered by a number of online payments companies such as Payflex and PayJustNow, guarantees full payment to the merchant, while allowing customers to buy goods and pay a small amount upfront and the balance over time, usually a matter of weeks.

The model has been applied for about eight years in places such as the UK and Australia, where it has more than 8-million users. Prosus, through its financial technology unit PayU, has invested in the business model, particularly in India.

Proponents say the service is a strong factor in helping to boost e-commerce adoption by hesitant consumers.

In the case of Blue Label, which specialises in selling prepaid airtime, electricity and ticketing, the company is looking to extend small loans for airtime and electricity to consumers, by offering the service to the lower end of the market, based on consumer behaviour.

Airtime advance has become a popular service in SA. If someone runs out, a mobile operator can offer small amounts of R5, R10 or R20 that are automatically recovered when the next purchase is made.

“Mobile operators have been offering advances on airtime for some time now. We’ll be the first to make it available for electricity,” Brett Levy, co-CEO of Blue Label told Business Day on Wednesday.

Blue Label has so far only piloted the offering and is looking to bring it to market in the coming months.

Mark Levy, the company’s other boss, says its differentiation is based on data profiles that Blue Label is able to develop through its analytics unit. By allowing people without cash to buy airtime or electricity for small amounts, the company can build credit scorecards for those who would otherwise not have access to normal lending.

“We’re targeting those people who borrow R15 or R20 ten times a month,” he said.

The next phase of the plan will be to use the credit profiles built through airtime and electricity transactions, to offer the traditional buy-now-pay-later model in partner stores and merchants. The decision whether a merchant will allow someone to leave an outlet without paying the full price will come down to the data and scoring that Blue Label will have produced.

This comes as the company reported R9.1bn in revenue for the six months to end-November, a 5% decline from the previous comparative period.

The company was able to increase gross profit 20% to R1.36bn, up from R1.14bn previously. Borrowings incurring interest were reduced to R1.97bn from R2.32bn, while it ended the period with net cash generated from operating activities of R862m.

Headline earnings, which strip out the effects of one-off financial events, were up by about half to 60.86c per share, from 40.96c in the prior matching period.

Blue Label shares were down 0.56% on Wednesday at R5.28, having fallen about 10% over the past six months.

gavazam@businesslive.co.za