Deal Dive: BNPL expands beyond its roots — that’s a good thing

Many people in the U.S. associate buy now, pay later (BNPL) with the ability to pay off a clothing purchase or a Peloton in multiple interest-free installments. It’s also associated with the growing concern that the strategy makes it easier for younger adults to find themselves in debt after spending beyond their means.

But that’s only one use case for BNPL, which are essentially just small interest-free loans. There is a growing group of startups looking to expand the BNPL model into other categories that are arguably more important than buying a new Apple Watch. Qomodo is one of them.

This week, Qomodo announced a €34.5 million ($36.9 million) pre-seed round that consisted of €4.5 million in equity and €30 million in debt financing. The round was led by Fasanara Capital with participation from Exor Ventures, Proximity Capital and Octopus Ventures, among others. The round was closed in December 2022, but the startup held off on announcing the round because it wanted to stay in stealth, according to co-founder and CEO Gianluca Cocco.

The Milan-based startup provides digital payments and BNPL services to physical retailers — including vets, auto shops and dentists — in Italy, which largely weren’t equipped to take digital payments at all.

Cocco said the company decided to focus on these areas because it wanted to give these types of retailers — which are frequent sources of large and unexpected payments for consumers — the structure needed to get customers to pay off these purchases without having to turn to a costly legacy loan provider.

“In our case, we are digitizing and making a legacy process to basically get a loan without interest using the technique of BNPL,” Cocco told me. “But we are actually giving a service. We are allowing families to afford expenses that are unexpected.”

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I really like this approach to BNPL for a few reasons. Using these interest-free micro loans for payments that people aren’t expecting, or budgeting for, can help prevent folks from having to choose between going into debt, taking a high-interest loan or just not fixing the problem. Anyone who has faced an unexpected potential $5,000 vet bill because their dog ate something at the dog park againknows this all too well.

While breaking up a purchase that isn’t as large as, say, buying a house or a car isn’t really ever a good idea financially speaking — the one thing I remember from my high school financial literacy class — sometimes, shit happens! It’s way better to have to pay off a car repair over time than to not have a car at all.

It’s good to see companies like Qomodo looking to use BNPL to lessen people’s financial burden as opposed to some of more traditional names in the space that largely fan the flames. And Qomodo is just the start.

Walnut is a company looking to bring the BNPL model to healthcare. Similar to Qomodo, Walnut is building a digital payment service for medical providers that allows them to offer these interest-free loans to their patients as opposed to making a patient who can’t afford to pay for a procedure up front pay it off through a debt collector or to forgo the treatment entirely due to financial reasons.

Slope is a B2B-focused startup that allows Slope customers to order inventory or supplies in a slower season when they aren’t taking in as much cash. That can help ensure they’re well stocked when things ramp back up.

Tabby, a BNPL focused on consumers in the Middle East, announced a $200 million Series D round last week. The Riyadh, Saudi Arabia–based company more closely resembles the U.S. consumer-driven BNPL structure, but I think it still represents an expansion to the category because it brings the concept of credit to a market largely for the first time. Only 8% of adults in the Middle East region have a credit card compared to 75% of adults in the U.S.

Of course, with all of that being said, regardless of whether consumers anywhere turn to BNPL for whatever reason, they have to be responsible about what they can actually afford. Just because these micro loans don’t rack up interest doesn’t mean there aren’t consequences for those who can’t make their payments.

While consumers have to be careful, being able to utilize these services for things people need to pay for rather than just the things they maybe want but can’t actually afford is overwhelmingly a good thing. The demand for this expansion of BNPL is clear, and I don’t think Qomodo will be the newest entrant for long.