Behind the Term Sheet: How Alma is Poised to Lead the “Buy Now, Pay Later” Movement in France & Democratize the Future of Retail
By: Jean-François Cochy and Jacky Abitbol
All eyes have naturally been drawn to the “buy now, pay later” (BNPL) space with US payments company Affirm’s recent $1.2B IPO. The successful IPO comes at a time when COVID-19 has catalyzed the growth of many digitally native sectors, particularly areas within fintech and e-commerce.
During the pandemic, consumers have increasingly turned to online shopping and taken advantage of installment or BNPL options to make more affordable purchases (spread out over time) without needing to rely on traditional credit during a time period of such economic uncertainty. However, while BNPL is not a new concept with major players in some geographies such as Affirm (US), Afterpay (Australia) or Klarna (Sweden), it’s only now starting to take off in France and other European countries.
In France, “point-of-sale” (PoS) financing is now a €6B market and growing at double digit rates since 2010. Around 60% of Europeans are now subscribing to this kind of credit. During lockdown, installment payments in France grew steadily yet the market is highly under-served compared to other regions (mostly due to France not having a credit bureau) and lacks digitally native customer financing solutions at checkout.
This is why we’re happy to announce our investment in Alma, the French fintech offering installment payments and pay later solutions, leading its €49M Series B funding round. Thanks to its innovative solutions, meeting the evolving needs of retailers and consumers alike by providing a seamless installment payment experience both online and in store, we believe that Alma will play a major role in France and throughout Europe as BNPL becomes the standard.
Buy Now, Pay Later — At the Intersection of the Embedded Finance Revolution & the Future of Retail
The global fintech market continues to be one of the hottest investment sectors, accelerating further with the current wave of embedded finance. In one of our predictions for the coming year, Cathay Innovation’s Denis Barrier outlines how the global fintech revolution continues in the next phase of “distribution anywhere from anyone” with “a major uptick in companies embedding financial services through APIs from credit and lending to insurance, banking and so on.”
Why? As we explain in our recent post, From startups to Starbucks: the embedded API opportunity, today’s “customers yearn for greater personalization and less friction while brands are looking for ways to improve monetization seamlessly. The ability to be at the right place at the right time, supporting consumers and merchants alike, where they want, how they want it, and when they want it — cannot be understated.”
To see this mega trend come to life, look no further than Stripe and Google’s foray into the baking and payments space with “Stripe Treasury” and “Google Plex” or Affirm’s recent public debut, counting major retailers and brands such as Peloton, Walmart and Wayfair who utilize its API-based solution offering point-of-sale loans or payment installments. We’re also seeing major traction in emerging regions such as Southeast Asia, where we invested in leading BNPL credit solution FinAccel. Active in Indonesia, where credit penetration is particularly low, FinAccel has emerged as the dominant fintech player, providing consumer financing at the merchant terminal or during an e-commerce checkout by partnering with 9 out of the top 10 e-commerce players in the region.
Retailers, both brick and mortar and e-commerce, are constantly looking for ways to reinvent themselves to better serve customers. With more and more brands embedding financial services at checkout, it’s a strong indicator of the future of retail and the push to provide more value-added services. By offering more flexible payment terms, retailers are no longer only selling a product or a service but helping consumers better manage budgets — thus creating a stronger connection between brand or merchant and customer.
Enter Alma — Bringing the Simple, Seamless & Flexible BNPL Movement to France and Beyond
France is ranked as the 6th largest e-commerce market worldwide, expected to have reached over €115B at the end of 2020. While e-commerce is certainly on the rise, credit payments account for only 3.9% of transactions with BNPL penetration even lower — representing a large growth potential.
Historically, the installment payment market in France has primarily been addressed by incumbent banking players or subsidiaries of retail groups with low digital expertise, longer integration times and painful user experiences — lacking the agility to serve clients of smaller sizes.
Alma was founded in 2017 by technology and financial veterans Louis Chatriot, a serial entrepreneur who was previously the GM of Italy for Stripe, and Guillaume Desloges who brings over a decade of experience in risk and compliance, a critical aspect in any consumer lending business. Louis and Guillaume, amassing unmatched talent to build out their team, have set a clear vision for Alma — evening the playing field between large retailers and the ever-growing number of entrepreneurial brands by granting access to the same tools that benefit merchants and consumers alike.
Alma has built a highly modular product, fitting the needs of both large e-commerce and retail players as well as the small and medium-sized retailers (which account for €27B GTV and 26% of total GTV). Alma enables merchants to offer flexible payment solutions online or in physical stores that increase sales and customer loyalty and is integrated in less than one hour. While consumers have the option to pay over the course of two weeks to a few months, merchants receive 100% of the payment from Alma at the time of purchase — restoring cash flow at a critical time for many retailers.
The BNPL trend especially resonates with the digitally savvy younger generations, who are less inclined to use credit cards and favor PoS financing as a way to make online commerce simpler. With Alma, consumers can make purchases with seamless, transparent and flexible payment options, including “try before you buy”, based on their budget and allowing them to avoid ending the month with negative balances.
We’ve been incredibly impressed by the team’s shared ambition and speed in reaching significant milestones and accomplishments, from scaling accurate machine learning-based risk scoring to setting up structured debt financing to fund client loans. In under two years, Alma was able to build a highly scalable tech platform and equip thousands of merchants with their innovative payment solutions — with the company now handling hundreds of millions of euros in transactions per year.
Parting Thoughts: The Next Dominant Fintech Player Making the Future of Retail Accessible for All Merchants
At Cathay Innovation, as a truly global investment platform spanning four continents, we keep a close eye on the emerging technology trends across regions. While the BNPL movement has certainly had significant traction in some geographies, we believe now is the time we’ll see the installment payments market truly accelerate in France and beyond.
This presents a big opportunity — one we believe Alma is well positioned to seize and emerge as the dominant fintech player in the region making the future of retail accessible for merchants of all sizes.
Our conviction is that very large companies will emerge after starting as end-point fintech solutions if they can successfully leverage the initial connection with end customers and build upon it a broader banking and financing platform. This is why Alma has been focusing early on building a trusted consumer brand, as the vision of its founders goes way beyond providing the best BNPL solution on the market.