As the first over-the-top BNPL product on the UK’s fintech scene, UK-based Zilch has just taken a huge leap towards becoming London’s next Fintech “unicorn” – that is, a potential $1 billion+ company and being the only BNPL firm of its type to hold a full license from the Financial Conduct Authority in the United Kingdom.
Zilch entered the FCA’s innovative Regulatory Sandbox Programme in 2019 and worked hand in hand with the regulator for two years to secure its full Consumer Lending License. This comes at a critical time for the BNPL industry as the Woolard Review, conducted by the FCA, is urging new regulations to ensure that people using BNPL services do not fall into debt.
Christopher Woolard, Chair of the review, commented, “Changes are urgently needed to bring BNPL into regulation to protect consumers, to ensure that there is secure provision of debt advice to help all those who may need it, and to maintain a sustained regulatory response to the pandemic”. Zilch, however, is way of ahead of the legislative curve relative to its competitors. With more than 70,000 shoppers signing up monthly, the company is experiencing explosive growth, likely because . Zilch customers can use Zilch to shop anywhere including prominent retailers such as Amazon, Nike, eBay, Matalan, Topman, and Boohoo.
“Zilch supports and welcomes the calls for regulation across the industry” states Philip Belamant, CEO and founder of Zilch.
“Responsibility must be at the heart of lending, with no exceptions. Zilch was born with regulation at its core, it has been part of our DNA from the start and that has resulted in us being the first fully FCA regulated [BNPL] provider in the UK. When we launched 2 years ago, we didn’t need to obtain authorisation from the FCA as we could have opted to operate within the exemption like the others but we chose not to. It wasn’t the quick route to market but in our view, it was the right way to do it for our customers.”
Zilch partners directly with MasterCard to create a virtual credit card that is compatible with any merchant and allows consumers and merchants a quick and easy way to finance small purchases in four equal payments over six weeks – without interest or late charges.
How Zilch works
The Zilch solution offers a powerful alternative to traditional credit cards, which are falling out of favour with younger consumers. The advantages over credit cards are obvious: those who pay with Zilch pay no interest charges, no late fees, and no annual fees, ever. Instead, the merchant pays a small percentage of the transaction.
Meanwhile, Zilch uses artificial intelligence and works with customers’ banks to ensure borrowers don’t get overextended. Initial credit limits are usually small, but borrowers can qualify for more, over time, as they make purchases and payments.
“This is what sets us apart from other BNPL players in the market today and what continues to drive us in creating a new category,” said Philip. “We want to, and can, help people during these difficult times as our systems self-adapt to the socioeconomic conditions of the day, and we feel privileged to be in a position to do so.”
What sets Zilch apart
Unlike most BNPL providers, Zilch is merchant agnostic. Its strategic alliance with MasterCard allows them to provide the service to customers wherever they choose to shop. Customers can use Zilch to get discounts and deals as well as pay over time wherever they like through one, easy to use experience.
Additionally, Zilch is the only BNPL provider that leverages Open Banking data (in partnership with CreditKudos) to continually assess customers’ creditworthiness.
Exploding growth
Demand for BNPL services has been surging – especially among younger Millennials and Generation Z consumers. Millions of these younger customers are looking for ways to stretch their cash flow to survive COVID-related shutdowns. New registrations have quadrupled over the past six months and are currently clocking at 30,000 per month. Meanwhile, transaction volume has been doubling month-over-month, as of the end of 2020.
Zilch recently completed a successful $30 million pre-Series B round (approximately €24.5M) – on top of a $10 million capital raise earlier this fall. This time around, the company has attracted investment from some key strategic partners, including Gauss Ventures and Simon Nixon (Seek Ventures and co-founder of Money Supermarket) to name a few.
“Customers recognise our dedication to focus on their needs,” Philip, a fintech veteran with multiple start-ups under his belt in the South African market, continued.
“Zilch is one of the most exciting and disruptive new players to enter the BNPL market,” added Nikita Tchesnokov, Partner of Gauss Ventures. “The company sets itself apart by engaging customers at the beginning of the buying journey and giving them a seamless, interest-free method of purchase. This unique consumer-centric approach, coupled with its technology and understanding of the millennial and Gen Z population, are core reasons for our decision to invest in the business.”
The company also announced a new feature called “Snooze,” which allows customers to delay a payment or even a whole payment plan by up to a week, with no interest, late fees, or penalties.
In fact, if the Zilch artificial intelligence system detects evidence of a sudden reduction in income, they will automatically suggest this feature to the customer, who can take advantage of the programme with just a few clicks on their mobile device.
The logic: it’s much more efficient to handle a customer this way than to pay a whole customer service organisation to answer toll-free phone calls from customers having short-term cash flow problems. This keeps costs down, and allows the company to reduce fees to the merchant, and eliminate them altogether for the company.
“Going forward, Zilch will continue to grow its platform and roll out new features and benefits,” said Belamant. “We are just getting started and have some amazing new features coming soon, all of which track our customers’ way of life, financial constraints, and aspirations”
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