ASX BRIEFS

BEFOREPAY GROUP LTD (B4P) - How Beforepay is Reshaping Access to Funds for Working Australians

• Andrew Musgrave

Share episode

Send us a text

Jamie Twiss, CEO of Beforepay Group Limited, takes us deep into the world of ethical fintech that's reshaping how Australians access funds when they need it most. With their Pay Advance product issuing 40,000 loans weekly at an average of just under $400, Beforepay has built a reputation for responsible lending with no hidden fees, late charges, or penalties.

The conversation reveals the sophisticated technology powering Beforepay's impressive sub-2% default rate - their 12th generation risk model that analyzes over 400 separate attributes from transaction data. This isn't just about measuring income or expenses; it's about understanding customer behavior and financial mindsets at a granular level. As Jamie explains, "Just as important is how the customer thinks about their financial obligations and their desire to repay the loan."

What truly sets Beforepay apart is their three-pronged growth strategy: expanding their core Pay Advance business, scaling their recently launched personal loan product offering up to $3,000 over three months, and growing Carrington Labs - their enterprise software arm that provides credit risk analytics to overseas lenders. With over $28 million in cash reserves, 250,000+ active users, and selection for MasterCard's Start Path Accelerator program, Beforepay demonstrates how fintech innovation can deliver both strong financial results and responsible consumer outcomes. Whether you're interested in financial technology, ethical lending, or ASX investment opportunities, this conversation offers valuable insights into a company transforming access to credit for working Australians.

Andrew Musgrave Host

Welcome back to ASX Briefs, where we dive into the stories shaping Australia's most innovative companies, and today we're joined by Jamie Twiss, the CEO of Beforepay Group Limited, a fintech trailblazer supporting working Australians through flexible, responsible access to funds. Founded in 2019, Beforepay has carved out a unique space in the financial services landscape with its Pay Advance product and, more recently, its newly launched personal loan offering. Jamie, thanks for joining me today and welcome to the ASX Briefs podcast. 

Jamie Twiss Guest

Thank you, it's a pleasure to be here. 

Andrew Musgrave Host

Now, Jamie, for listeners that may be unfamiliar with Beforepay, can you just provide a brief overview of the company? 

Jamie Twiss Guest

So, Beforepay Group is an ASX listed fintech. We're about five years old and we have two sides to our business. The business that people know us best for, Beforepay, is our short-term ethical lending division that advances small amounts of money to Australians who just need a little bit extra to tide them over until the next time they get paid. So, we write about 40,000 loans per week. The average loan size is just under $400. It's usually for about a month, and so we charge a fixed fee for that service. There are no late fees or penalties, no tricks or traps, and the idea is just to give people a safe and affordable way of navigating through those short-term cashflow challenges. 

So that was our original business, which we launched in 2020. We also have a second division, Carrington Labs, which is the enterprise software arm Beforepay Group, and what Carrington does is it takes that same capability around credit risk analytics and scoring people and taking in lots of different data to form a sharp point of view on risk and credit worthiness, and it resells that to other lenders overseas, primarily in the United States and Canada. So that's a newer and smaller business, but we're very pleased with how that's going so far. 

Andrew Musgrave Host

Okay, and the company delivered record profitability in Q3 FY25. So, what were the key drivers that contributed to this result and how sustainable are these margins moving forward? 

Jamie Twiss Guest

So, the business is doing well right now really on all fronts, and if you look at our Q3 result in particular so covering the period of January to March of 2025, I'd say there were a few things that led to that very strong result. The first one is continued strong top line growth. So, although we have well over a million registered users and well over 250,000 active users’ people who have taken out a loan relatively recently, we still see a lot of opportunities. A lot of Australians still aren't aware of what we do and don't have access to safe and affordable alternatives when they need a small amount of money for a short period of time. So, we're still seeing good top line growth in terms of the number of users. Once somebody is on board with us, they tend to be quite passionate supporters of the company. It is a good product. Customers really do like it. They are quite sticky and so we're seeing good growth there as well. So, revenue we're at an annual run rate of more than $40 million in terms of the revenue from that Pay Advance product. 

Now, the second big driver of the very strong results has been our very strong performance on credit. So, our default rates have consistently fallen since the inception of the company and they now hover on a net basis below 2%, which, given the nature of the product, is something we're enormously proud of and that puts us in a good position. That drives the unit economics, that drives the profitability of the group, and we have a deep capability in how we assess individuals and work out their credit risk and that's really showing its benefits. And I think the third driver of the strong result has just been a laser-like focus on cost. So, we have always run this business very lean. Everything we do is very heavily automated. The total company is about 50 employees and with those 50 people we're not only issuing those 40,000 loans every week but we're also providing that Carrington Labs software to other lenders and running the company overall. So that just relentless focus on operational efficiency is a tremendous contributor to the profitability of the group. 

Andrew Musgrave Host

Okay, and just touching on the credit risk, defaults are down to 1.26% despite higher advanced volumes. So, what refinements have you made to the credit models or limit management processes? 

Jamie Twiss Guest

So, there's quite a bit in this, and really this is at the very core of the company's DNA. This is the thing that we spend a lot of time thinking about and working on. The way that we assess risk is, when you sign up as a customer, we get your consent to take a copy of your line-item transaction data, so your bank statements and other account level information and we will calculate hundreds of different attributes about you. We've recently released the 12th generation of our risk model, and that has a little over 400 separate attributes, everything from what's your income to very specific spend categories. We look at some behavioural things about patterns of how you use your money, and we assemble those into an overall score. That is something we are always improving on and working on, and in addition,  as we continue to get more and more data and we have billions of lines of transaction data now and we've done more than 4 million loans, so we have a very rich data set Just these models, both AI and machine learning. As you get more data, the models just become more powerful over time, so we have a really nice tailwind. We also, as you rightly point out, do a lot of work around loan sizing and limit setting. So, we don't just look at somebody's risk score and say, okay, we're going to approve them. We look at the risk score and say, based on this, what is the right size limit for them? And so we do a lot of pretty sophisticated modelling around. Well, if we give this person a loan that looks like this or looks like that, how does that blow through to their probability of repaying it and, as a result, what's the optimal value for them? And that ability to work out that elasticity curve, as we call it, adds tremendous value to the business. 

Andrew Musgrave Host

Okay, and now the launch of your personal loan product marks a significant evolution from your core Pay Advance offering. So, what early insights have you gained from this pilot phase and how do you see this fitting into the overall long-term growth strategy? 

Jamie Twiss Guest

Yeah, great question. So, we launched a larger loan product, the personal loan product, in October of 2024. And the thinking behind that was we're really proud of our Pay Advanced product. Our customers really value it and use it. That product will go up to $2,000 in size, depending on the customer, and up to two months in duration. Now, that's a great product. It gets a lot of people through difficult short-term situations. 

What we were seeing more and more is that you have customers who use that product and it works well for them, but then, as they move through their financial lives and they become more affluent, they reach a point where $2,000 in two months doesn't actually meet their needs as often as it did before, and so the personal loan product is designed to give people a seamless transition as they become wealthier, as they start to have more complex and rich financial lives, to continue working with us, because we know these customers well, we understand them, they know and trust us, and so right now, the personal loan product will go up to $3,000 in three months in duration, and we expect those numbers to both increase over time as well. 

We're still in a pilot phase as we test this and make sure that the risk performs in the way that we expect and make sure that we feel very comfortable with the product before we really start to ramp it up and scale it. But I think the early insights are that I think we have tremendous trust and confidence in our customers and I think we do a very good job of understanding them well enough to see you as both the ability and the intention to repay, and we fully expect that will translate through to the personal loan product because that scales as well. 

Andrew Musgrave Host

Okay, and you touched on Carrington Labs, which is emerging as a powerful engine for innovation. So, what kind of impact do you foresee from being selected for MasterCard's Start Path Accelerator program? 

Jamie Twiss Guest

Yeah, so we really enjoy working with MasterCard. So, Carrington Labs is one of a handful of startups that they've enlisted around the world to work with MasterCard and be introduced to other folks in their ecosystem and potentially new client prospects and so on. So, I think that's a tremendously valuable relationship to us. We see that as reinforcing and accelerating the growth of Carrington Labs. We also find that the nature of what we do at Carrington Labs is it's pretty distinctive in terms of the level of capability that we have, and even on a global basis. We find that we are quite competitive and attractive to lenders as they think about how to improve approval rates, how to get their loan sizing correct, how to reduce defaults, how to accelerate their growth. I'm recently back from a series of three trips in a row all offshore marketing, caring to labs, and we feel very confident about the future of that business. 

Andrew Musgrave Host

Okay, and now, with over 250,000 active users, what have you learned about customer behaviour, that's, informing product design and customer experience at the company? 

Jamie Twiss Guest

That's a great question. I think the biggest thing that we've learned is that it is, of course, really important to understand a customer's financial position and make sure they have the ability to repay a loan, to make sure the loan is appropriate for their needs, and, of course, the ability to pull transaction data and extract a lot of insight from that is tremendously helpful. But just as important is how the customer thinks about their financial obligations and their desire to repay the loan, and what we consistently see is that there are people where that willingness, or lack of willingness, is the biggest determinant in whether we get repaid or not. Now that creates an interesting conundrum for lenders, and I think this exists for every lender that lends it to individuals around the world. Because many of the traditional metrics that people use to assess whether somebody should get a loan are much more focused on potential capacity to repay. 

So, they'll look at pay slips and they'll look at total expenditure and they'll look at credit scores, and those are helpful up to a point, but they don't provide a lot of insight into somebody's mindset as they borrow money and how they're going to think about repaying that. So I think one of the great things we’ve been able to do with that insight is create literally hundreds of different factors that give us insight into how a customer thinks about money, how they think about financial obligations, how they prioritize the use of funds, how quickly money moves once they receive it, whether they will focus more on repaying debt or increasing expenditure if they have a one-time gain. And we've been able to really drive down that default rate very considerably, as you note, off the back of, I think, that much deeper behavioural understanding of our customers and potential customers. 

Andrew Musgrave Host

Okay, and how do you see your positioning against both traditional financial institutions and emerging fintech competitors, particularly as you diversify your offerings? 

Jamie Twiss Guest

So, I think on the lending side in Australia, I'd start by saying that we were the pioneers on this pay advance category, this short-term, small-dollar, safe and affordable lending, and we continue to lead that category by, I think, most reasonable metrics. And so, we don't see the traditional players doing much in that space because they simply can't operate effectively or sustainably in this small dollar space. So, the average revenue from one of our advances is less than $20. And a traditional lender really struggles to get out of bed for less than $20. Their cost structures just don't allow it. It's too manual, it's too slow. So, there we feel very little competitive intensity from traditional players. 

And I think with startups and fintechs, I think our higher levels of capability and sophistication around credit assessment and limit setting, combined with a first mover advantage, a strong consumer brand, a large and loyal user base, has been tremendously helpful. And then on the Carrington Labs side, as we move into that space, I think there you have a lot of traditional players who strongly want this capability but struggle to build that capability internally. It's harder for them to hire and retain the right people in a larger organization. It's harder for them to focus on this, the exclusion of the other priorities that we have. We do see some other fintechs and startups in this space, but again, I think we were early to the party, given the fact that we built this for our own lending and again, I think we have a quite relevant distinctive capability, even on a global basis, as a result. 

Andrew Musgrave Host

Okay, and just touching on the financials, with over $28 million in total cash and a 34-quarter funding runway, how do you assess your capital flexibility and balance sheet strength in today's environment? 

Jamie Twiss Guest

So, we do have a very, very strong balance sheet. As you noted, we have, depending on the quarter and depending on how you count, more than $20 million in unrestricted cash that we're able to use as we see fit, and, of course, in addition to that, the business is profitable. So over time, that number tends to be going up rather than down. So that's a tremendous strength and gives us tremendous confidence in the future of the business. It does give us flexibility should we want to do something different or accelerate the growth of the business. I think we are always very, very conscious about making sure that any dollar we spend will absolutely more than pay for itself in due course, and so we are cautious and thoughtful about spending that money. But absolutely having that kind of financial strength is a tremendous advantage to have, especially now, when funding for smaller companies can be a bit up and down and a bit unpredictable. 

Andrew Musgrave Host

Okay, now just to wrap things up for investors and stakeholders what are the key growth levers for FY26 and what should investors be paying close attention to as you execute the next stage of your strategy? 

Jamie Twiss Guest

So, we look at growth across three different buckets. The first one is the core Pay Advance business, which today makes up the vast majority of our revenue. That's what drives the overall profitability of the group and that continues to be a very strong business. I think we look for continued growth there. I think I wouldn't say we are trying to continue to increase margins. I think the margins off the back of this really strong credit performance we've had recently have been very, very solid. But if we can continue to grow the top line and margins stay where they are or thereabouts, then that sets the whole company up very, very well. On the personal loan side. 

So, we are going to make sure that we've got that exactly right before we really start to drive more volume through it. But once we do, we would expect that to be a pretty material contributor. If you look at just a simple back of the envelope analysis about as these larger loans that go out for a longer period of time as they get going, even making broad brush assumptions, you can see the very significant growth accelerator that we'll have at the right time. And then, finally, on Carrington Labs, again that's a business we feel very confident about, given the quality of the capability. It is a high margin business, it's very capital light business, and so there I think I tell investors watch this space and keep an eye on us as we start to announce more and more deals on that side as well, because that really reinforces the bottom line quite quickly when revenue comes in the door on the Carrington Labs side. 

Andrew Musgrave Host

Okay, Jamie. Well, it's been great to chat today, so thanks very much for your time and we look forward to further updates from Beforepay in the upcoming months. 

Jamie Twiss Guest

Thank you. Thank you for having me. 

Andrew Musgrave Host

That concludes this episode of ASX Briefs. Don't forget to subscribe and we look forward to catching you on our next episode.