PETALING JAYA: Retailers, who are hard-hit by lockdowns caused by the Covid-19 pandemic, are increasingly turning to buy now, pay later (BNPL) platforms to reach digital-savvy consumers.
BNPL platform Atome, which launched its services in Malaysia in the last quarter of 2020, has seen its order volume grew by 100 times and merchant network grew five times in the past six months, according to Atome Singapore and Malaysia general manager Trasy Lou-Walsh.
“About 95% of our orders came from online channels such as merchants’ e-commerce websites or mobile apps. The pandemic has accelerated the trend for Malaysian consumers to use digital wallets and contact payment options. Consumers value the flexibility to maximise their budget and manage spending,” she tells StarBiz.
Walsh points out that a big segment of consumers are still underbanked, and BNPL presents them an option to make affordable, quality purchases.
Atome allows customers to split their bills into three equal interest-free payments over three months.
“With Atome, consumers know exactly when their payments are due, how much and for what. Our key verticals include beauty, fashion, travel, homeware and lifestyle,” she explains, adding that Atome’s average ticket size ranges from RM200 to RM400 versus traditional instalment plans where purchases are for thousands of ringgit.
A promotional sign for Atome, a buy now pay later (BNPL) app, at the entrance to a Zara store in Singapore. The growing popularity of BNPL services among young Singaporeans is unnerving regulators and politicians who fear BNPL apps prey on 20-somethings who may be financially naive. Photographer: Wei Leng Tay/Bloomberg
In the BNPL arena, Atome has the widest merchant network in Malaysia, and works with over 500 merchant partners including Zalora, Agoda, Aldo, Box Of Bricks (Lego reseller), Xixili, Li-Ning, Shein and Stream Empire Holdings as a payment checkout solution in their stores and websites.
“Atome is an omni-channel retail partner and works well both for brick-and-mortar retailers and online channels. We support traditional retailers who go online. Due to the lockdowns, physical retail, the tourism and hospitality sectors are struggling,” says Walsh.
According to the Malaysia retail sales report in March, the country’s retail industry had recorded its worst performance in two decades last year, contracting by 16.3%.
The department store and fashion and fashion accessories segments had shrunk the most at 38.3% and 37.9% respectively.
Walsh notes that Atome’s platform has seen increased demand from retailers in the past six months, as they appreciate how BNPL helps to drive traffic and sales.
Retailers have experienced an average 17% increase in ticket order size since adding Atome as a payment checkout option, according to the platform’s in-house data analytics for the past six months.
“Some Malaysian merchants report closer to double the ticket size (such as Love18C) and 30% higher conversion at checkout (such as Aldo Malaysia). This is similar to what we’ve seen in other markets too,” she says.
While BNPL services are still at an infant stage in Malaysia, its market share is expected to more than double by 2024 according to the Global Payments Report by FIS-Worldpay.
Walsh adds that when the lockdowns ease, Atome wants to support these merchants and shopping malls as shoppers return.
“We already have a partnership with Agoda to support both domestic and overseas tourism.”Atome’s business model is based charging merchants a transaction fee for every purchase while customers benefit as it costs nothing extra for them.
Walsh cites as an example, the purchase of a RM300 work desk where the payments are split into three – RM100 at the point of purchase, RM100 in another 30 days, and RM100 in 60 more days.
“We pay the merchant in full (minus the transaction fee) within three working days, and we take on all the risk,” she says.
Unlike credit cards, when consumer misses a payment, Atome immediately suspend his or her account and there is no interest charged; only a fixed fee that is capped.
“Atome’s business hinges on the ability to assess that credit risk in real-time, because if you don’t get it right, your business will not be sustainable or grow healthily over the long term. This goes back to our expertise in risk management and credit profiling technology,” explains Walsh.
“Our business model is incentivised to ensure the customer pays on time, every time. In this way, the merchant wins (by customer buying a product), and customer wins (by being able to enjoy the product).
The BNPL provider earns transaction fee and keeps providing the service (to cover risk and fraud impairment, interchange fees),” she adds. Walsh points out that it is essential to understand that Atome’s BNPL has a system and business model in place that does not allow for debt accumulation, as opposed to traditional credit models.
Fixed fee
“We do not charge interest. Users pay a small fixed fee instead of snowballing interest charges for missed payments. Our incidence of late payments is in the very low single-digit,” she says.
Atome users have to link a debit or credit card to their account, and payment is auto deducted.
In Singapore, Atome users can also use Apple Pay, with auto deduction from Apple Pay wallet. This feature will be rolled out to Malaysia soon, says Walsh.
Users can also easily track their payment schedules, when and how much they have to pay on the mobile app, and Atome also sends multiple reminders via SMS, email and mobile app notifications to inform users when payment is due.
Also, Atome app users are rewarded for paying early and the company regularly generate content regarding financial literacy on its blog, as well as work with partners to conduct joint financial literacy courses.
Walsh notes that the Atome app currently has an average 4.8-star rating on App Store and Google Play store.
On the lockdowns and movement restrictions, she says they have resulted in retailers looking at Atome for support to digitalise and adopt new payment solutions.
“Atome also supports them in digital marketing, provide analytics to help them better understand their customers and joint marketing efforts to widen their exposure,” she says.
The BNPL platform had recalibrated its campaigns and marketing to better support retailers online, and organised joint digital campaigns such as “Get Raya Ready”, “Get It Week” and recently, the “Happy From Home” to support the changing landscape for consumers to shop safely online.
“It has been challenging but we have a team of about 20 to 25 employees working from home, mostly around Johor Baru and Kuala Lumpur, to take care of localised operations, and merchants and consumers. We will expand support to other major cities when the movement restrictions are lifted,” says Walsh.
She also notes that offline retail will still be a big part of the consumer journey as consumers look to omnichannel experience.
“We will look to support merchants with more high-impact marketing activities in shopping malls and high-traffic areas,” she says.
Founded in 2016, Atome is part of Advance Intelligence Group, a Series-C artificial intelligence (AI)-driven technology company headquartered in Singapore.
The company operates in nine markets namely Singapore, Malaysia, Indonesia, the Philippines, Vietnam, mainland China, Hong Kong, Taiwan and Thailand.
Widest coverage
Walsh points out that in the BNPL arena, Atome has the widest coverage of markets and merchants – with over 5,000 merchants covered in the region.
“This makes it easier for businesses in Malaysia to scale their business and explore regional partnerships.”
On business growth, Walsh says Singapore, being Atome’s first launch market, has seen the most traction, both among shoppers and retailers. “We’re seeing growing order volume and growth in Hong Kong and Malaysia.”
Atome targets to expand its Malaysian retail and consumer base up to 10-fold by end-2021.
“There is a long queue of retail partners pending Atome integration when the movement restrictions ease. We will continue to invest in growing our Malaysian headcount and support expansion not just in Kuala Lumpur but also across all major cities in Malaysia,” says Walsh.
The company will continue to work on more features to reward good repayment behaviour, via points and gamification, and develop customisable features (such as launching a rewards programme Atome+).
“Similar to other markets where we operate, we look forward to engage in healthy dialogue with regulators with the goal of building healthy, responsible, long-term business that protects merchants, consumers and financial technology innovation,” says Walsh.