Refundid is an Australian startup that formed last year and launched its product in February. It promises to remove a significant friction point in eCommerce, the delay between requesting and receiving a refund for an online purchase.
In fact, the company is promising to refund the money as fast as 30 seconds. That’s a big leap from the days or weeks it often now takes. Most sellers often want to receive the returned goods before issuing a refund.
The company just raised $3 million to pursue this game-changing ambition. And the lead investor is notable. According to the Australian business publication SmartCompany, the round was led by AP Ventures, which is the venture capital fund backed by Aussie buy-now, pay-later platform Afterpay, which was just acquired by Square. Paul Greenberg, who founded Australia’s National Online Retailers Association, also participated in the round. He will join Refundid’s advisory board.
Afterpay’s participation makes complete sense. Refundid’s business model is essentially the buy-now-pay-later of refunds.
Most BNPL platforms assume the risk of any pay-over-time purchase, fronting or at least guaranteeing that the merchant receives full payment. It’s up to the BNPL to have a strong enough risk assessment model to keep its bad pays to a minimum. Refundid similarly assumes the risk when issuing refunds. It fronts the money to the consumer, then receives payment (we assume with a fee on top) from the merchant when the refund is approved.
Also similar to BNPL, the name of the game is merchant relationships. As an early mover in the refunds space (if it even is a space yet), Refundid has an opportunity to lock in key merchant deals in Australia, where it currently operates.
The CX Angle
Giving up their money faster may not sound appealing to merchants. The hook for merchants is customer experience. Being able to deliver an instant refund (risk-free) can help set an online merchant apart from a competitor. So we can easily see this service catching on quickly both with merchants and perhaps by BNPL’s that want to bake it in their solution.
Of course, the question is whether this is a good business model for Refundid. BNPL has a similar risk profile, and that space has done well, obviously, at least on the revenue growth side of the ledger. One just needs to look at Affirm’s earnings today, which showed a 77% jump in revenue.
But any solution taking on this risk needs to have a finely tuned risk model, especially as it scales. One big fear for BNPL is that as competition squeezes profit margins, the margin for error on risk assessment narrows. This, along with M&A, will help winnow the field, which would be healthy for BNPL in the long run.
For its part, Refundid wants to replicate Afterpay’s global success. It plans to expand to New Zealand and the U.S., and from there, the rest of the world. We imagine the next funding round will come soon if adoption grows as fast as we think it might.