Gary Rohloff, the CEO of Laybuy. Photo / Jason Oxenham.
There's nothing like a rival business being sold for $41 billion to bring a sparkle to your eye and validation for what you are doing.
When the Herald meets Laybuy founder and managing director Gary Rohloff this week it's just hours after Square Group's massive takeover offer for Afterpay - Australia's biggest buy now pay later provider.
Asked what it means for the sector Rohloff says everyone is still trying to work that out.
"But I think the most obvious is that it starts conversations around consolidation and I think it really validates the model when you see a business like Square coming in and just swallowing up what is the largest buy now pay later platform on the planet."
It's nearly a year since Rohloff, a former retail boss, listed his Kiwi buy now pay later company on the Australian stock exchange - taking a big leap forward for a company he founded with his wife and two sons just four years ago.
What started with a conversation with his family around the kitchen table about a safe and easy alternative to credit cards to buy a pair of jeans has now led to a business with 829,000 customers and over 10,000 merchants.
Its head office on Auckland's North Shore is based at Smales Farm in the shared working space of the B:Hive building where around 80 of its 100 staff are based.
When Rohloff moved into the office it was just him and wife Robyn who is Laybuy's brand manager, son Alex who is involved in the IT side of the business and oldest son James.
James has since moved on to set up his own business in the cryptocurrency space.
Rohloff says the idea for Laybuy as it is today first came to him when he was heading up fashion retailer Ezibuy in 2003.
"The genesis of it was back in the Ezibuy days when we were talking as a board on how we might do better for the company and I suggested an Ezibuy laybuy, and at the time there was a whole bunch of reasons why we didn't go forward with it."
But as he watched what was happening in Europe with Klarna, in the US with Affirm and across the Tasman with Afterpay Rohloff decided it was time to step off the corporate ladder and become an entrepreneur.
"I said to Robyn - I don't want to die wondering, let's give this a go. And fortunately she said yeah okay, let's do it."
The family mortgaged up their family home to get the initial capital and set up shop at B:Hive with just the four of them.
"I was so determined and so passionate about what I thought we could create that it was one of those situations where this is just going to work. I'm going to make damn sure it does."
Rohloff says he has always been hands-on with the businesses he has managed - experience that has served him well in setting up the business.
"I don't like the whole concept of an ivory tower. I like getting involved in it. When you start your own business you are doing everything from day one. And I quite enjoyed that."
Coming from a retail background - he has previously headed up Number One Shoes and Warehouse Stationery as well as Ezibuy - also helped Rohloff sell the concept to Kiwi merchants.
"One of the advantages we had, particularly starting off in New Zealand, was New Zealand is a village as we know, and when you have been involved in retail for 16 or 17 years you know most people so that network was definitely there.
"But I think importantly being able to talk to retailers in their own language, being able to articulate what the benefits would be for them. And how we could work together was an important element when we first got under way."
It now has over 8100 merchants signed up in New Zealand and Australia and over 312,000 active customers. In the last year alone its merchant numbers have jumped 55 per cent while its customer numbers have risen 20 per cent.
But it is the UK market which Rohloff is really targeting to grow Laybuy. In 2018 Rohloff moved to the UK to set up shop there with Robyn and Alex. They were just planning to visit New Zealand for the 2020 Summer when they got stuck here with the Covid lockdown.
Running the UK arm from New Zealand hasn't held back its growth. Laybuy's latest quarterly figures released last month show it now generates more revenue in the UK than its home market. In its June quarter $6 million of its $10.4m revenue came from the UK business.
It has 2314 merchants there, up 424 per cent in the last year alone, and 516,900 active customers - a rise of 143 per cent.
But it is not without its challenges.
"It just means long days, you are on the phone mornings and nights, most nights until 10 or 11 at night. It's the quality of the people we have up in the UK that makes it work."
While Covid has presented massive hurdles for many businesses it has been a boon to the buy now pay later industry with customers stuck at home and forced into using online shopping.
"Covid has accelerated the online shopping experience for people, many who previously did not shop remotely had no choice. Even my parents who are in their 80s had no choice but to shop online because there was no alternative - you had to get your groceries online.
"As a consequence of that shift to online shopping buy now pay later presents very well on an online shopping site and that has accelerated the adoption of it which we have benefited from."
Last month the UK began to offer more freedom to its citizens after 18 months of restrictions.
Rohloff says there has been a little bit of an impact on where people are spending their discretionary income.
"Being allowed out again means I am not shopping at home, I'm actually going to a bar or restaurant or to the movies. I think there has probably been a little bit of an impact on retailers."
But he says because Laybuy has been adding so many new merchants to its platform over there it hasn't seen a negative impact so far.
To counter it they have launched an in-store solution. "We have rolled that out across 900 stores in WH Smith as our launch partner and we are rapidly adding more retailers to that. So I think as [the UK] summer progresses and that becomes more familiar with people we will see more and more people paying in-store. We are certainly seeing that in New Zealand."
Rohloff is now focused on launching an affiliate programme in the next few weeks that will add up to 5000 retailers.
"We are launching with a top 200 and that includes names like Asos, Amazon, E-bay, BnQ, Marks and Spencer - so big big brands that will really provide our customers access to a lot more retailers which is pretty exciting."
On the ASX it hasn't been an easy 11 months. After listing at an issue price of A$1.41 Laybuy's shares were trading at 43c last Friday before the Afterpay deal. They have since risen to 56c.
Rohloff says there is little he can do about the share price fall apart from keep driving the growth of the business forward.
"I've had a number of conversations with investors who have been very supportive of us and no one can debate or argue the operational performance of the business.
"What we have to do is keep delivering on those numbers. The market is the market, I can't control that sentiment, nor can I control how they look at Laybuy but [what we] can point out is the relative valuations against our peer group which we do. But we have just got to keep delivering."
Also looming on the horizon is the likely regulation of the sector. The UK has already made it mandatory for buy now pay later companies to undertake credit checks before they allow people to sign up and Australia has also brought in a code of conduct.
In New Zealand budgeting experts have expressed concerns that the services are getting vulnerable consumers into debt they can't afford to pay back. As the product doesn't charge interest it does not come under consumer credit laws.
But those who don't make their payments on time are hit with late fees.
Laybuy's financials show 42 per cent of its revenue in the last quarter came from late fees compared with the 48 per cent it earned from merchants. It already undertakes credit checks on consumers before they sign up and turns some prospective customers away.
Rohloff says there is a lot of talk about regulation.
"I think a lot of that talk is a bit of a beat-up by the people that don't want buy now pay later to flourish. The reality is this is a payment method that consumers love and they are embracing it and they are eschewing credit cards in their droves.
"I think regulation is appropriate for a sector that just requires customers to be protected."
But he believes it shouldn't be heavy handed. "You don't need a sledgehammer to belt in a tack and that's where I think regulation needs to be mindful."
Buy now pay later is still a young industry but Rohloff sees it as a sea change in the way people look at buying across retail and services.
"I think people are looking for alternative access to credit. One that is interest free. I think it is important that people understand that debt per se is not a bad thing, provided it is borrowed responsibly and lent responsibly."
What is buy now pay later?
• Buy now pay later allows consumers to get products and services upfront while paying them off in part payments over a set period, typically six weeks.
• Consumers don't pay interest but will be hit by late fees if they don't pay on time.
• Merchants are said to enjoy a boost in sales and also pay a percentage of the sale value to the buy now pay later operator they sign up with.
• Managing director of Laybuy.
• Age: 59.
• Born: Grew up in Tauranga.
• Education: Otumoetai College. Undertook an MBA from Massey University at age 32.
• Career: Left school and joined the BNZ where he ended up in Wellington at 24 years of age working in the head office of the Bank of New Zealand as assistant secretary to the board. Moved to Zeal Corp, then went to Transpower as assistant treasurer when Transpower split from ECNZ. In1995 he moved to Auckland to be treasurer at Mercury Energy, which is now Vector. He then went to Westpac and was part of a team that set up a risk advisory business, and while there was offered the role of CFO at Ezibuy before becoming MD. He then moved to head up Warehouse Stationery and Number One Shoes. Launched Laybuy in 2017. In September 2020 the company was listed on the ASX.
• Family: Married to Robyn with sons James and Alex.
• What was the last movie you saw? Wrath of man.
• Last book you read? A Gentleman in Moscow by Amor Towles.
• Last holiday you went on? Just back from a long weekend in Queenstown.
Auditors PwC: Cited disruptions to operations from that IT upgrade.