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A proposed new service blends the rising buy-now-pay-later (BNPL) phenomenon with traditional credit through a Mastercard offering.
Recently listed neobank Douugh (ASX: DOU) and buy-now-pay-later player Humm Group (ASX: HUM) have entered a Memorandum of Understanding (MoU) for a joint venture to launch a new product in the US market.
Last month Douugh submitted the final build of its financial wellness and banking app to the Apple App Store, following a successful beta program it believes will now pave the way for US market entry.
Now the company has entered a non-binding deal with Humm - formerly known as Flexigroup - to launch a Douugh-branded 'buy now pay anywhere' feature in the US market in the first half of 2022.
Humm, known for its BNPL service for larger transactions and a business model that has been profitable unlike most of its peers, will provide its technology platform to Douugh to manage a lined of credit of up to US$1,000 to eligible customers through a dedicated 'Credit Jar'.
The JV would also involve a virtual Mastercard that allows customers to meet urgent expenses and pay back over six weekly instalments.
DOU shares surged 13 per cent to $0.30 this morning on the announcement, while HUM shares were up by close to 6 per cent at $1.34 each.
"Through our proposed joint venture with Douugh, we are taking our first steps into the United States as a company," says Humm CEO Rebecca James.
"At the same time, we are demonstrating how humm ventures can create innovative and novel ways to take humm's world class technology and capabilities to expand its relevance and distribution.
"As Australasia's bigger buy now pay later partners with America's newest neobank, we are proving that we can take what we have learned locally and apply it on the global stage, disrupting the payments industry and providing better customer experiences across the world."
Humm is also making a strategic investment of $2.5 million as part of Douugh's capital raise, at what is currently a relatively bargain issue price of $0.22.
Douugh founder and CEO Andy Taylor (pictured) says the company's data clearly shows the need for a responsible, interest-free credit feature to help customers consolidate credit card debt and smoothen out cash flow.
"Credit Jar is very different to traditional point-of-sale BNPL offerings and represents a step change in the model, because we are treating it as a credit product, which is what we strongly believe it should be," says Taylor.
"Our solution will actually help boost a customer's credit score when repaid on time, and will only be made available to people who can easily service it as part of their everyday budget via our responsible lending criteria.
"It will also be able to be used anywhere that Mastercard is accepted. We believe this additional feature has the potential to really drive new customer acquisition to the Douugh app."
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