ANZ bets against buy now, pay later with $100m acquisition

On Friday, ANZ Bank launched a $100 million takeover bid for ASX-listed microcap Cashrewards, and in doing so, bet against the buy now, pay later sector – perhaps inadvertently.

The offer price is 35 per cent lower than the company’s valuation at its initial public offering last year, yet the Cashrewards board unanimously recommended the deal. It reveals how building a profitable fintech is much harder than the current hype suggests.

Cashrewards launched in 2014, but the same model operated overseas for a decade prior. The business lets members join a free club to receive some cash back on every purchase from partner retailers. Members typically receive between 3 and 6 per cent cash back from its 1700 participating stores.

The model works because retailers are prepared to pay a percentage of each sale for customer acquisition. This budget mostly goes towards advertising, but some is funnelled into “affiliate programs” that pay websites for any sales they refer. Cashback businesses leverage these programs, and affiliate fees are then shared with members.

In FY21, Cashrewards’ 330,000 members drove 3.5 million transactions worth more than half a billion dollars. So, for every $100 spent online in Australia during FY21, almost $2 was spent via Cashrewards.

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