Shifting away from the unfriendly world of credit cards and on the back of rise in consumers’ preference for deferred payment for online purchases, there has been a massive opportunity in Europe for ‘Buy Now, Pay Later’ or BNPL segment in the automotive industry.
Cashing in on this opportunity, UK BNPL provider Bumper has raised $12m in Series A funding to roll out its car repair financing platform across Europe. The round is backed by Jaguar Land Rover’s InMotion Ventures, Porsche Ventures and Silicon Valley based Autotech Ventures and a group of prominent angel investors.
The latest round brings total funds raised by the company to $17.5m. The new funding follows the launch of the startup’s service in Ireland, its first European market outside of the UK and a £10m flexible working capital facility from Secure Trust Bank Commercial Finance to help support its growth plans in May this year.
Rise of automotive BNPL
There has been a rise in the used car market with a growing need for financing repairs on older vehicles with new car purchases currently at their lowest since 1998. This is reflected in the European aftersales market, which is projected to hit €300 billion by 2030.
Founded in 2013, Bumper (formerly Auto Service Finance), the London-based auto fintech startup supports customers to spread the cost of car repairs by offering interest-free, flexible payments so that drivers can better afford necessary repairs and maintenance. Users can split bills and authorise repairs in seconds via a fully digital automated process, making the process more efficient and removing the need for uncomfortable price negotiations with dealerships.
The fintech company is also partnering with leading OEMs including Volkswagen Group, Ford, Jaguar Land Rover and Nissan. Almost 60% of the franchised UK dealer market currently use the platform as it increases repair conversion rates and lowers discounting and price negotiation. Bumper charges a small transaction fee to the dealerships in exchange for providing the full cost of the repair up front.
Loan defaults, no more
To ensure both dealerships and consumers are protected from loan defaults, the platform has developed a Machine Learning-enabled automotive scorecard as part of a rigorous credit checking process, including access to the dealerships’ APIs to source customer information quickly and simpler application processes.
Talking about Bumper’s competitors and how the startup is different from them, James Jackson, CEO and cofounder, Bumper said: “Our main competitors are the large BNPL providers such as Klarna and credit cards. We are interest free and with short payment terms, customers are debt free quickly but risk long term debt with credit cards.”
“Compared to BNPL generic providers, we are embedded in the software used by all the major dealerships, enabling customers can approve their repair work and pay with Bumper in just a couple of clicks. We are also the only BNPL provider to look at vehicle data as well as consumer finance data, enabling us to make more accurate lending decisions.”
Spreading wings in Europe
Already a dominant player in the UK and Ireland, the startup has unveiled its product in Germany and is now looking at launching in major European markets by 2022, starting with Spain and the Netherlands in the next three months. The new funding will be utilised for hiring in the new markets, scaling the tech team and marketing efforts as platform builds its B2C proposition.
The BNPL player has plans to unveil a consumer app in the UK in January 2022, which will act as a one stop shop for all automotive requirements such as payments for congestion charges, parking and tolls and approving repair work.
Taking on unexpected car repairs
As Bumper’s transactions are typically large, one-off sums, customers are being encouraged not to regularly borrow more than they can afford and hence, default rates are low.
According to Jackson, with dealerships selling just 40% of identified repairs and drivers left out of pocket and with dangerous vehicles, the current process for handling car repairs is broken on both sides. “Bumper is providing a simple alternative to unexpected car repairs as we’re enabling them to purchase necessary repairs at an affordable rate. We’ve seen huge demand for expanding the services we offer,” he said.
Regarding how Bumper is trying to revolutionise repair financing, he informed: “Bumper enables customers to spread the cost of car repairs by offering interest-free, flexible payments to help drivers better afford necessary repairs and maintenance. Customers can split bills and authorise repairs in seconds via a fully digital automated process, making the process more efficient and removing the need for uncomfortable price negotiations with dealerships. We are the only BNPL provider to aggregate thousands of vehicle and consumer finance data, with thorough affordability checks, ensuring it is always lending responsibly.”
Alex Smout, Principal, InMotion Ventures said: “The technology seamlessly integrates with the existing systems of dealerships and OEMs. The platform’s proposition will benefit millions of consumers who need more flexibility when paying for crucial repairs.”
Alexei Andreev, Managing Director, Autotech Ventures said: “We are eager to support Bumper’s expansion to Europe. The platform’s business ties with leading automotive OEMs, deep integration with dealerships and repair quotation tools create formidable entry barriers for other players.”