Fashion fintech is branching out — and getting more intelligent — with U.S. installment payments provider QuadPay scooping up Sydney-based visual search tech start-up Urge Holdings.
The companies revealed the $6.1 million acquisition in the U.S. on Tuesday, following its filing at the Australian Stock Exchange.
The appeal centers on Urge Holdings’ technology. The start-up developed and launched The Urge, a text-based fashion search engine, and Shnap, a new visual search app launched in July that’s akin to a “Shazam for fashion.”
“Straightaway, we got incredible traction [with Shnap], but off a small base,” cofounder and chief executive officer Doron Ostrin told WWD. “The feedback was amazing. You could use the Shnap Chrome extension, and see all the visually similar products. The idea behind Shnap was about helping people quickly and easily find the products they were looking for.”
QuadPay’s larger audience was the perfect fit for Urge’s ambitions, he added, and its technology offered some much-desired innovation for its new owner.
“The Urge provides us with a way to accelerate ambitions around product discovery and search,” explained QuadPay co-ceo Brad Lindenberg. The companies both appealed to aspirational shoppers and, he added, “with our scale, bringing it together makes perfect sense.”
The deal caps a six-month period of activity for Lindenberg’s company. In May, QuadPay partnered with payments provider Stripe, in a move that radically expanded the platform. Backed by Stripe’s issuing infrastructure, QuadPay customers could shop and pay via installments anywhere Visa is accepted.
A month later, the American company merged with Australia’s “buy now pay later” (BNPL) company Zip Co, an AfterPay rival keen to broaden its reach, particularly in the $5 trillion U.S. retail market. The deal formed a $2 billion global payments business with a combined customer base of more than 4 million customers and 26,000 merchant partners.
QuadPay then received $200 million in a revolving line of credit from Goldman Sachs, with mezzanine financing from Oaktree Capital, in September. And last month, the company shook up its executive team, appointing Laura Kane, formerly of PayPal and American Express, as senior vice president of enterprise sales and Kevin McKeand, formerly of BigCommerce, as vice president of business development and strategic partnerships. By that point, QuadPay had struck a number of new merchant partnerships, generating a combined $3 billion in online volume.
Not that everything has been smooth sailing. Prior to all of that dealmaking, the California Department of Business Oversight determined that QuadPay had operated like a finance lender without obtaining a required license. The department, now named the California Department of Financial Protection and Innovation, reached a settlement with the company in April to acquire the license, refund more than $685,000 to California consumers and pay close to $69,000 in penalties.
Even so, it’s clear that the business was flush with cash. And with the resources to grow its capabilities, QuadPay is set to bring Urge into the fold.
Crucially, QuadPay plans to integrate the startup’s visual search into its payments platform, to improve its web site, for starters, and eventually its app.
QuadPay’s existing search and discovery requires people to look on a retailer-by-retailer basis. But soon customers will be able to shop apparel using photos, as well as compare prices and search by brand or product, even across retailers.
For instance, if a cool pair of sneakers pops up in a photo, a customer will be able to search the item, even without knowing the brand. For QuadPay’s merchant partners, the changes mean they will be able to offer more targeted and personalized promotions to consumers.
“Down the track, probably sometime next year, we want to bring in machine learning and some AI tools to really allow our systems to learn what people similar to you are shopping for — a little bit like the Instagram algorithm,” Lindenberg said. “And so you would see a curated experience of products that are most likely very relevant to your demographic and what we know about you, based on the interest graphs of other people.
“I don’t think anyone’s really cracked that yet,” he added. “That’s where I really see things going over the sort of next 12 to 24 months.”
Under the terms of the deal, Urge Holdings cofounders Ostrin and his wife, Cayley, will join Quadpay, where they’ll work on product integrations and scaling their technology. Quadpay expects Urge to be fully integrated later this year.
The BNPL space seems to be ramping up in recent months. As the global coronavirus pandemic and its effects on consumers’ budgets stretch on, the demand for new and creative ways to shop, and pay, has become more of a necessity than a frill.
Installment payments have enjoyed successes abroad — in places like Sweden, home of Macy’s-backed BNPL company Klarna — and Australia, where more than 10 percent of consumers rely on such methods.
It has taken time to catch on in the U.S., but now interest-free payments have become more appealing, especially in these times and particularly for credit card-wary Gen Z consumers.
According to The How We Shop Report by PayPal and PYMNTS, 57 percent of all U.S. consumers say that the availability of digital payments options would impact their choices of where to shop. And 48 percent of consumers who prefer BNPL payments reported that they would not shop with retailers that don’t offer it.