April 13, 2024


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We are ‘democratizing the access to free credit’ [Video]

More companies are entering the red-hot buy now, pay later (BNPL) space, and one new player is pushing a big assertion.

“What we’re doing is democratizing the access to free credit,” Philip Belamant, CEO and founder of Zilch, a London-based BNPL startup founded in 2018, told Yahoo Finance Live (video above). “We want our customers to go anywhere they want and buy anything without being penalized financially for the privilege.”

The company says its BNPL offering is different from competitors Afterpay, Klarna, and Affirm (AFRM) in that customers with Zilch can opt to pay for purchases by splitting their transaction into four interest-free payments over a six-week period with any retailer that accepts Mastercard.

In other words, while most BNPL players let users split payments at specific retailers, Zilch creates a virtual card that can be used at any Mastercard-linked merchant online.

Users “can go to Macy’s or Walmart, or they could go online to Amazon or eBay, and they could pay over time completely free of any cost and any interest,” Belamant explained.

The company has been seeing tremendous growth recently, onboarding 20,000 customers a month and hoping to ramp up operations in the U.S., the CEO noted.

BNPL players competing to ink deals with retailers, gain users

The overall idea between all the BNPL players is the same: Users can split up purchases without taking on interest or hurting their credit score to borrow.

But with big established companies like Mastercard (MA) and Visa (V) also jumping into the BNPL space, the competition has really intensified.

For instance, just this week Mastercard expanded the retailers it partners with for its own BNPL offering, called Mastercard Installments, to include companies like American Airlines.

Affirm, a big American player, also announced on Thursday that it was expanding its partnership with Amazon.

Matt Schodorf, owner of Schodorf's Luncheonette, swipes a credit card on the Square Stand at his restaurant, of which he owns in the Highland Park area of Los Angeles on June 5, 2013. The Square Stand rings customers up on Squares applications. Merchants fed up with the clunky system they have for processing credit and debit card payments are moving increasingly to credit card swiping machines that plug into mobile pads. And Square and PayPal are launching initiatives in the hopes of getting their slice of the action. This is one of 13 establishments nationwide who have this technology, two in California.  (Photo by Gary Friedman/Los Angeles Times via Getty Images)

Matt Schodorf, owner of Schodorf’s Luncheonette, swipes a credit card on the Square Stand at his restaurant, of which he owns in the Highland Park area of Los Angeles on June 5, 2013. (Photo by Gary Friedman/Los Angeles Times via Getty Images)

Despite the competition, Belamant said his Zilch’s business model will allow the company to stand out in the long term.

This is because users on Zilch can choose any retailer they want to buy from and “circumvent this network” by accessing a larger number of stores, Belamant said. So, in effect, the company can “grow significantly faster” because “we go direct to the customer … and allow the customer to pay over time anywhere they like for anything,” he added.

More people in the U.S. are starting to use BNPL. A BofA survey of 1,124 BNPL users found that 47% of respondents had used BNPL eight or more times in the last 12 months, while 54% of respondents plan to use it eight or more times in the next 12 months.

About 56% of respondents said the average BNPL transaction size was less than $200.

And interestingly, 24% of BofA’s survey respondents said they turned to BNPL because they had maxed out their credit cards.

Aarthi is a reporter for Yahoo Finance. She can be reached at [email protected]. Follow her on Twitter @aarthiswami.

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