The share price of neobank Douugh Ltd (ASX: DOU) is going nuts, it’s up 15% after announcing that it’s going to partner with buy now, pay later business Humm Ltd (ASX: HUM).
What’s the partnership?
Douugh and Humm are going to form a joint venture and this will see Douugh deliver a “powered by Humm” branded buy now, pay anywhere solution in the US market.
So far they have signed a non-binding memorandum to launch this product into the US market in the first half of 2022.
Douugh will utilise Humm’s technology platform to manage a line of credit of up to US$1,000 to eligible customers with a ‘credit jar’ on Douugh’s platform and virtual Mastercard. These amounts will be repaid over six weekly instalments.
The partners are treating this as a credit product. But it will still be an interest-free, buy now pay later product.
This is the first proposed joint venture generated by Humm ventures, which is an initiative to explore new ways to grow across the world.
Humm is going to make a strategic investment of $2.5 million as part of Douugh’s capital rising at a price of $0.22 per share.
Douugh will be responsible for the technology, marketing, credit decisioning, customer service and automated collections (0 to 30 days). Humm will be responsible for the credit scorecard variables and acceptance criteria, providing warehouse funding, the BNPL technology platform, credit losses and collections (of more than 30 days).
However, there are still a few details to work out. Due diligence must be completed by both parties, the two businesses must enter into a formal binding agreement, there will need to be a licensing agreement with Douugh’s US banking partner and it requires Douugh’s platform to be fully operational.
The market will be updated when a formal binding agreement has been completed.
Humm CEO Rebecca James said: “Through our proposed joint venture with Douugh, we are taking our first steps into the US as a company. At the same time, we are demonstrating how Humm Ventures can create innovative and novel ways to take Humm’s world class technology and capabilities and expand its relevance and distribution.”
Summary thoughts
The US is a large market and there may be good growth potential for this partnership to work. I’m not sure how much profit growth it can make, but I think it’s a very promising development for Humm (which used to be called FlexiGroup) – the business is already profitable and it’s growing with these new partnerships.
I believe that Humm is one to watch. It’s my preferred BNPL business. But I prefer other payment ASX growth shares even more such as Pushpay Holdings Ltd (ASX: PPH), which looks very scalable in my opinion.
