The use of buy now, pay later (BNPL) has exploded in the past few years as more and more consumers tap into the opportunity to pay for expensive, one-time retail purchases in several installments. This boom has also created fierce competition in the BNPL space as established players compete with new entrants vying for a piece of the growing pie.
To stand out in the crowded space, Philip Belamant said Zilch, a fully consumer credit licensed BNPL firm he co-founded in 2020, has created a BNPL 2.0 product that plugs the holes created by the traditional credit cards and the first-generation BNPL products on the market today — most of which are not regulated and don’t allow customers to use their cards to shop at different merchant stores.
Instead of trying to create an “all-inclusive shopping destination” like other players have attempted to do, Belamant said Zilch focuses on providing ease of use and value around customer transactions, like offering an instantaneous deal or a surprise cashback offer. The company also goes beyond fiat currency to allow users to fund purchases with their unused loyalty points and rewards.
“With our product, customers [can] make debit transactions and earn value and cashback and rewards, and then take that value and use it to discount larger transactions which they may want to defer over time for absolutely free, no interest of any kind. And that’s this positive flywheel that we’ve created for customers,” Belamant, who is also the CEO of the U.K.-based firm, told PYMNTS in an interview.
Read more: BNPL Startup Zilch Valued At $500 Million Ahead Of US Launch
Zilch also uses Open Banking technology, in addition to its own proprietary tech, to accurately assess customers’ affordability on each transaction. This is unlike credit cards, he added, where an affordability check is only done once and banks don’t have a real-time view over users’ financial position several months down the line.
Looking to penetrate other markets in the region, the U.K. firm recently announced that it had expanded its partnership with Mastercard to allow users across the region to pay at any merchant that accepts Mastercard instead of having the option at checkout on selected retailers’ websites.
Creating this ongoing and consistent value for customers is what makes their BNPL product unique from other players in the field, Belamant said, and has led to record company growth in the last 15 months.
“Never before have 2 million customers in the U.K. had the ability to now operate and transact to a level of almost a billion dollars a year of run rate with no APR of any kind and have earned more than £3 million of discounts and rewards and deals in Q4 of last year alone,” he added. “We’ve never seen a product like this before.”
BNPL Regulation Is a “Good Thing”
In the U.K., there have been strong calls for BNPL regulation due to growing concerns the product is leading people to incur more debt. Earlier this year, the U.K. Treasury closed a public consultation on BNPL, with a clear intention of regulating the sector.
Belamant said consumer protection has been a top priority since the London-based FinTech launched and they’ve been engaging with the U.K.’s Financial Conduct Authority (FCA) long before it started looking into the BNPL space. In his view, it’s a “good thing” that the regulators are taking a view on the activity which will enable businesses to operate with their consumers’ wellbeing in mind.
This month, for instance, the regulator has taken action to review the terms and conditions of certain providers, while others have been questioned on late fees and refunds.
“I’m very pleased to say that again, we’re leading the way in this space,” he said. “We don’t charge any late fees of any kind. We allow customers to offset loans with three funds, and of course, they can get these right back to their bank cards as well.”
Cracking the U.S. BNPL Market
Following a $110 million Series B extension that put its valuation at more than $500 million early last year, the London-based FinTech scaleup announced the acquisition of commercial lender NepFin in August to bolster its international presence ahead of its “imminent” launch in the U.S. this year.
See also: BNPL Firm Zilch Buys Commercial Lender NepFin, Readies US Growth
Belamant said launching in the U.S. is an opportunity for Zilch to set up in a less complex, fragmented market than in Europe, where dealing with multiple languages, currencies, regulations and domestic payment rails can be a challenge for a young company looking to expand.
Even though the company plans to expand across Europe, cracking the U.S. market presents huge opportunities for business.
“[It’s] predominantly one language and one new currency for us to support, so from a system [and a] complexity perspective, that makes a lot of sense,” Belamant said. “And with aspirations of going public in the future, we think we need to be a dominant player in the U.S. market, which is today the largest eCommerce market in the world.”
Related: London BNPL FinTech Zilch Launches in Europe
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