Given the myriad storms hitting buy now/pay later lending, Splitit plans to reorganize its financial structure and product strategy in an effort to ease the pressure it feels from regulators and investors alike.
The installment lender has a capital commitment of $60 million from Motive Partners and other investors. Motive will supply $50 million of the total — and the first $25 million of that commitment is contingent on the Israeli-based Splitit delisting from the Australian Stock Exchange, where it listed as a foreign corporation before its IPO in 2019. Splitit chose Australia for its public listing due to the success of
Splitit's shareholders will vote on the delisting in late September. To receive Motive's second $25 million, Splitit will have to hit certain financial targets for 2023. These targets were not disclosed, though Splitit contends that it is on track to reach the goals.
As part of its restructuring, Splitit plans to "redomicile" from Israel to the Cayman Islands.
"As we think about global scale, being domiciled in the right place is critical," Sheth said, adding the move to the Cayman Islands would simplify tax and regulatory compliance, given the "complexity" of Splitit's operating structure. The company additionally hopes the move will lower overall costs.
Financial companies often list their headquarters in the Cayman Islands due to its ease of registry, and lack of payroll, property, corporation, capital gains and withholding taxes for foreign firms that operate in there, according to
"There's nothing negative about Israel. It's a great market for fintech and we have a large team that we will continue to grow," Sheth said. Splitit also has offices in Atlanta, London and Melbourne, Australia.
Splitit is part of the fintech portion of the BNPL industry. That market suffered a
The company's leadership is ready to get off the roller coaster.
"When you're a public company you are required to raise capital on a constant basis," said Nandan Sheth, CEO of Splitit. "That distracts the entire management team."
If its shareholders approve the deal, Splitit will use the proceeds of the investment to fund a global expansion and partnerships that focus on card issuers in addition to payment processing and BNPL at the point of sale. "My time will be freed up. And it's expensive to be a public company," Sheth said.
"The tough market environment for BNPL companies is what is driving this decision," said Aaron McPherson, principal at AFM Consulting.
In the Splitit/Motive deal, existing shareholders can keep partial ownership in Splitit as a private company or reduce ownership by selling shares before the delisting. Motive did not provide comment by deadline on the structure of its investment. Motive plans to take a stake in Splitit, according to the BNPL lender.
Splitit accesses a consumer's unused credit card balance to fund installments, a different model than most BNPL firms that extend new credit. The firm has long taken a more conciliatory approach to banks and credit cards than other BNPL firms that sell themselves as a way to avoid credit card debt.
"Issuers have been disenfranchised by legacy BNPL; we're going after bank customers and have aspirations of providing service beyond BNPL," Sheth said.
Splitit moved into new markets earlier this year by partnering with
Splitit recently introduced several other products and partnerships as part of its pivot, inducing an agreement to offer installments over Rapyd's network of merchants and online marketplaces. Another deal with Visa involves the two companies co-developing a card-attached installment product and Splitit-powered payment orchestration, along with other services — with their first deployment scheduled for the fourth quarter.
Other moves include debuting a two-second single-click installment lending product, and adding support for Google Pay and Apple Pay.
"Express checkout is the fastest way to do installments," Sheth said. "We'll continue developing for merchants but with the added capital we will also focus on issuers."
In its most recent quarterly earnings report, issued July 31 for the quarter ending June 30, Splitit reported revenue of $3.1 million, up 39% from about $2.2 million a year earlier. It also reported operating expenses of $4.4 million, down from about $5.2 million a year earlier. Splitit did not provide a timeframe to reach profitability.
BNPL firms were overpriced, overfunded and overvalued during the runup of the market in 2021, according to Eric Grover, a principal at Intrepid Ventures.
"Large merchants are sure to put additional pressure on Splitit's fees," Grover said. "As a public company, Splitit would pay a price for that. Assuming it's adequately capitalized, as a private firm management should have more leeway to try to create a growing and economically-attractive BNPL business."
As Splitit boosts checkout conversion and repeat purchases it can grow relationships with merchants, reducing its reliance on fee competition, according to Sheth.
