After the Bloomberg scoop that Apple is about to enter the Buy Now Pay Later (BNPL) market, buy today and pay tomorrow, the big names in the sector have suffered a decline in the stock market. Simone Mancini, managing director (CEO) and founder of Scalapay, an Italian startup operating in the sector, did not bat an eye. “Our rivals are credit cards: in ten years’ time, services like ours will be more used than credit cards, which will continue to work well for companies, but not for consumers – says Mancini – Data from the American and Australian market they already indicate that this is the direction ”.
The BNPL market is a very flourishing market in Europe, where there are about twenty operators who undermine Klarna, one of the largest unicorns of the old continent. In 2020, according to data from CB Insight, investors poured $ 1.5 billion into companies in the sector globally. Entering a market early in its maturity or shortly before it is Apple’s modus operandi. The entry of Cupertino in the BNPL, shortly after that of Amazon, certifies its growing trend. In Europe we are only at the beginning, and this prompted Mancini in 2019 to leave Australia, where he had lived for 26 years, to return to Italy, the land where he was born and left at the age of 3. Why not London, home of fintech? “From the beginning we decided to focus on fashion, and what better country than Italy?” France, perhaps, given that unlike Italy it invests heavily in startups? “To carry out a certain type of work, knowing the language well is important: my Italian was decent, while I didn’t know French at all,” says Mancini.
Having focused on fashion soon proved to be the winning move: Scalapay disintermediates the financing process, transforming it into a deferred payment. One third immediately, the other two thirds one and two months later. Just sign up and you can do it during the payment phase in 4,000 stores, online and physical, belonging to 1,600 brands, including Decathlon, Calzedonia, Mondadori and Bata. This is how Scalapay challenges cards and credit institutions, which before granting a loan require you to fill out various documents and must send credit cards to the customer before he can use them. Scalapay is immediate: you sign up, associate a payment method and use it. Interest-free for the user and no activation costs for the seller, who receives the full amount immediately in exchange for a percentage of 4.2% on each purchase. And that thus sees the conversion rate increase (from 10 to 20 percent) and the value of the receipt (from 50 to 200 percent). “As soon as we get a large customer, his competitors contact us immediately”, says Mancini. In less than two years, Scalapay has opened in the main European countries, scaling the team from a few people to a hundred collaborators hired during the lockdown. It wasn’t all pink and white: “Unfortunately we made a mistake in bringing people who did not have the same values on board – says Mancini – And we underestimated the importance of personalizing and localizing the product in the various countries. We only hired sales experts to scale, giving the impression that we had nothing more to test. And we understand that when you hire people to manage the launch in a new country, you can’t just see them a couple of times in video chat, but you have to meet them and work with them ”. Experiences to treasure for the next ones 200 hires, expected by the end of the year. One of the reasons that justify the seed round closed in January, the largest ever seen in Italy: 40 million euros.
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The investors in this round are Fasanara Capital (London), Baleen Capital (New York) and Ithaca Investments (Milan). And it is no coincidence that two out of three are foreigners. In 2019, when he prepares to leave Australia, Mancini presents his project to almost all the major Italian ventures: “Some wanted to invest only in European trends, others did not want to risk, still others asked for more data and all this really seemed to me strange to do an early round ”. Finally, Ithaca arrives, a company owned by Luigi Berlusconi, Silvio’s fifth son, to which Mancini was introduced by a German investor. Ithaca leads a million euro round in which several Australian and European angels participate. Money that serves to prove that the company can conquer a space in a market that has not yet exploded in our latitudes.
Mancini has been collaborating with Johnny Mitrevski for a few years: together they have worked on various e-commerce projects and have gained a good experience, not without going through some failures. To understand how to improve the performance of independent e-commerce in the early stages, the two collect information from different operators in the sector, and identify the keystone in the deferral of payments, a trend that is growing rapidly in Australia and America. So they decide to try it in Europe and Simone leaves for Italy. The beginning is not easy: they contact a hundred salesmen and the first to say “why not” is a brand from the world of babies. A sector in which people find themselves buying together a lot of things that will be used for the first months of life of the unborn child. The first data are encouraging and so Scalapay starts working in the field of fashion and cosmetics. Most of the customers are women between 18 and 40, the average receipt is 110 euros, but at the beginning no one believes that people can pay such small amounts in installments.. The data, however, say that “Scalapay increases the user’s purchasing power” and so, for example, instead of buying a 40 mm perfume bottle, the buyer opts for the 100 milliliter one and postpones part of the payment. “Scalapay eliminates the feeling of guilt that is generated by charging the monthly budget for unforeseen expenses”. The default risk is much more perceived than real, says Mancini, and in any case it does not belong to his own company: the debt is discharged in securitisations or on a bank, “at rates that fall as the data prove the real risk value “. The real unpaid is not a declared figure, but Mancini argues that it is very low.
After expanding its business in the field of home and sports products, in the past few days, Scalapay has begun to attack the tourism market, thanks to research on its customers according to which many of these would be interested in premium options being able to defer part of the payment without interest. In the meantime, the startup is working on a new product with which to attack the American and British markets, but without expanding into the world of technology, which they leave to companies like Apple and Amazon. “Those who buy very expensive items tend to want to spread the payment over several months, not in a couple of installments”.
Scalapay represents a win-win for those who buy and for those who sell: “It has always been my dream to create a company like this – says Mancini – To work, a product must build a certain type of relationship with the user. We do not want to encourage the user to spend beyond their abilities, we want to create something that adds value and not that takes it away “.
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