As buy now/pay later loans gain momentum, Canada’s
Brim’s CEO and founder Rasha Katabi is a standard-bearer for Canadian female fintech entrepreneurs, having just raised CA$25 million in Series B funding for the Toronto-based firm. The funding, which was co-led by Canada’s Desjardins Group and U.S.-based EPIC Ventures, will enable Brim to roll out its platform-as-a-service technology in Canada and the U.S. Katabi spent 20 years at TD Bank, CIBC and Bank of America Merrill Lynch before founding Brim in 2017.
“We had a slow start when we launched installment loans on our credit cards in 2018,” said Katabi. “But we saw tremendous momentum in 2020 due to the pandemic. Also, BNPL is now a much more accepted feature across the retail and payments industries, and something which our platform-as-a-service clients are interested in offering to their customers.”
With its installment loans and its open rewards scheme, Brim is capitalizing on two trends that have come to the fore during the COVID-19 pandemic. One is consumers’ desire to use rewards flexibly for everyday shopping needs, and the other is their reluctance to build up revolving credit card debt.
As demand for BNPL has grown during COVID-19, investments in Canadian BNPL providers have heated up, and several established financial institutions have entered the Canadian BNPL market, including
Installment loans can be provided on a stand-alone basis by a dedicated provider that has signed up a network of participating merchants, or on credit cards as an alternative to revolving credit. BNPL loans may offer consumers lower rates than those charged for revolving purchases on credit cards or even 0% interest rates.
Brim has issued hundreds of thousands of its own Mastercard-branded credit cards to Canadian consumers and businesses, Katabi said. Its cards offer cash back, installment loans, 0% FX fees and rewards points on purchases from Brim’s merchant partners, which can be redeemed against purchases from any retailer.
PayBright and Australia’s Afterpay lead the Canadian BNPL market, with 30% and 31% shares, respectively, according to Citi Research. Afterpay officially launched in Canada in August 2020, while Sezzle processed its first Canadian BNPL transaction in April 2019. In February 2021, Afterpay noted in a first-half earnings statement that its current Canadian annualized underlying sales run rate is AU$90 million.
Brim’s BNPL product can be used at any Mastercard-accepting e-commerce or brick-and-mortar merchant worldwide. Brim cardholders tap a button in their Brim app to set up installment loans for purchases, paying a monthly charge of 0.475% of the price plus an upfront fee.
Merchants participating in Brim’s rewards scheme have the option of funding the upfront fee for installment loans — 5-7% of the purchase price — and can provide BNPL offers to Brim cardholders to incentivize sales. Brim’s own cards offer installment loans on purchases above C$500, but companies issuing its cards can set the threshold at any level, Katabi said.
Katabi sees Brim’s path to growth coming through companies issuing credit cards on its platform.
“Credit unions and smaller banks using outdated in-house or outsourced credit card platforms can use our technology to offer credit cards with features such as open rewards and BNPL loans,” she said. “Our platform can be deployed in eight weeks on a turnkey or modular basis.”
Katabi said that Brim will announce a credit card partnership with a midsize Canadian bank in the next few weeks, which will replace the bank’s 17-year relationship with an established market player. “We’ll also be rolling out our platform into the U.S. by the end of 2021 and adding digital financial products such as checking accounts,” she said.
Sezzle, which offers BNPL for smaller purchases, has also experienced rapid growth in Canada.
“Between April 2019 and October 2020 we signed up 1,000 Canadian retailers and added 500 merchants in November and December,” said Patrick Chan, Canadian general manager of Sezzle. And between the end of 2019 and the end of 2020, Sezzle saw 800% growth in active Canadian users.
Chan sees Sezzle as a marketing tool for merchants. “We have 108,000 North American followers on Instagram, who look to see where else they can use Sezzle,” he said.
RBC, Canada’s largest bank, launched its PayPlan product in January 2021, using technology from Alliance Data subsidiary Bread. PayPlan enables consumers to obtain installment loans on big-ticket purchases at participating retailers in Canada.
“We offer interest-bearing loans, where consumers pay the interest, and interest-free loans, where merchants fund the loans,” said Amit Sadhu, RBC’s vice president of personal lending. “We don’t have penalty fees, and consumers can only repay their loans from their bank accounts, not from credit cards."
As a full-service bank, RBC offers BNPL as one of a raft of services to its merchant customer base.
“As merchants migrate online, they want to offer additional payment options to their customers and to be able to customize their installment loans,” said Sadhu. “We give them the flexibility to decide whether to offer interest-free loans, partly subsidize the finance charges, or get consumers to pay the interest.”
CIBC launched its CIBC “Pace It” installment plans for eligible CIBC credit cards in September 2019.
“During the pandemic, we’ve seen CIBC Pace It used for larger-ticket items such as home renovations and improvements. There has also been strong uptake and repeat usage by millennial clients," said Jeffrey Smith, CIBC’s vice president for card products and personal banking products. As cardholders pay interest on their loans, merchants aren’t charged any fees or interest, nor are they involved in setting up the cardholder’s installment loan plan, Smith said.
Unlike other BNPL providers,
“Consumers don’t pay Splitit any fees or interest, as the fees are paid by merchants accepting Splitit,” said
