Buy Now, Pay Later is a lending model which has seen widespread growth in recent years, with a number of massive fintechs adopting the practice.
As digital adoption continues to rise following the COVID-19 pandemic, the model has gone from a niche service to a full-blown movement, with payment processors, credit card providers, CRMs and vendors racing to implement the offering.
Gen Zers in the US using BNPL has grown six-fold from 6% in 2019 to 36% in 2021. Millennials’ use of BNPL has also doubled since 2019 to 41%, with Gen X adoption also tripling, according to Forbes.
While there has been growing worry over the usage of BNPL, as regulators raise questions over consumer risk and companies work to clear up language regarding the model, one area that seems unaffected by bad loans is recreational, passion purchases.
An overlooked market
“Octane‘s mission is to connect consumers with their passion. And the way in which we do this, is supplying consumers with tools. Think of it as from research inspiration to the transaction financing of the actual purchase, all the way to future purchases,” CEO Jason Guss said in an interview with FinLedger.
“We aim to be everywhere consumers are in a seamless, end-to-end transaction,” he said, adding that the company focuses on purchases that have collateral behind them.
“The most obvious is our home market, which is the power sports space: motorcycle, ATV, UTV jet ski, snowmobiles. We’re also entering the marine and RV space.”
Something unique about the company is that while many BNPL providers focus on either a merchant- or consumer-based approach, Octane targets both in addition to manufacturers. This multiple touch point-based approach involves manufacturers buying down the interest rate to drive demand and a better consumer closing experience for merchants and consumers.
“Future purchase as well. Because we do servicing in-house, we maintain that relationship with the consumer,” Guss said. “And because we have these relationships, merchants and manufacturers will have the ability to be able to help consumers get to future purchases as well.”
Almost all of Octane’s transactions are still closed via the merchant channel, but Guss believes that having touchpoints at each stage of a products’ journey creates impactful relationships. He also says building these relationships and expanding the company’s sales funnel is part of current expansion efforts.
“Our original business was just focused on that point-of-sale transaction. And we’ve been expanding a funnel solely since then, but these investments really enable us to accelerate our push to be everywhere customers shop.”
This effort is one way Octane is using its $401 million in total funding raised, which includes a recent $52 million Series D led by Progressive Insurance in August.
Driving forward
The company is also working to double its engineering team within the next year, and Guss says that partnering with Progressive will help move Octane into its next phase of growth which includes marine and RV financing.
“We wanted to partner with them and bring them into our cap table as a board observer on our company, so that we could get the advantages from that,” Guss said. “They’re also in most of the markets that we want to immediately go into so they’re already a huge player marine and RV and many other markets are really excited about.”
Guss says Octane became cashflow positive last year and this year is full year, gap-net income positive. He says while some segments struggled during the pandemic, the company’s sales model is focused on high-ticket items which attracts those largely unaffected by the pandemic.
“Everyone assumed that consumer demand would fall off a cliff, but what actually happened is people shifted travel spending to things that you can safely socially distance, that are totally outside. So our market actually saw a record, retail boom last year,” he said, mentioning that the biggest challenge this year has been dealing with supply chain issues.
“We’re not letting ourselves off the hook and just saying ‘We’re gonna wait until the inventory comes back.’ We’re actively working on things to try to partner with our manufacturers, dealers and consumers on that work for this environment.”