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Zilch CEO: We’re ’democratizing the access to free credit’

Zilch Founder and CEO Philip Belamant joined Yahoo Finance Live to discuss why his buy now, pal later company is different than competitors.

Video Transcript


ZACK GUZMAN: Well, London-based buy now, pay later company Zilch is making some waves. The company just announced a new $110 million Series C funding round, making it the fastest company in Europe to ever reach unicorn status with a valuation now north of $2 billion. That's four times the $500 million it was valued at just eight months ago.

And for more on that, very happy to welcome in the founder and CEO of Zilch, Philip Belamant joins us right now. And Philip, when we look at buy now, pay later, maybe some of our viewers might not even understand how it differs necessarily from a credit card in buying some things. But the business growth you guys have posted has been bonkers, if I can say so myself here.

The business up 8 times, 8-fold what you guys had going on in March of this year. So talk to me about what's connecting with people and what you guys are trying to do.

PHILIP BELAMANT: Good to see you, Zack. So really, what we're doing is we're democratizing the access to free credit. I mean, that's really what we're up to here. And what that means is we want our customers to be able to go anywhere they want and buy anything without being penalized financially for the privilege.

And so how that translates practically into the real world is that our customer could go anywhere Mastercard is accepted, so they could take their Zilch Mastercard, and they could go to Macy's or Walmart, they could go online to Amazon or eBay. And they could pay over time, completely free of any cost and any interest. And we think that that is certainly hugely valuable and obviously resonating with our growing customer base.

In the UK, growing really quickly. We're onboarding 200,000 customers a month. And we're certainly excited to bring this innovative product to the US soon.

ZACK GUZMAN: Yeah. And I guess it's a pretty crowded space. We're showing some other companies in this space, Affirm obviously catching a lot of attention with their Amazon partnership. You guys are growing faster than Affirm in terms of growing your customer base from zero to 1 million in 13 months. Klarna as well.

I mean, when you talk about how you distinguish yourself, you're talking about how easy it is to use the Mastercard partnership here, others leaning into retailers themselves. How do you distinguish yourself from something else where you could also get the same kind of buy now, pay later benefits?

PHILIP BELAMANT: Well, really, I mean, we had this question a lot as we sort of did our early rounds of funding in the business. The question was always, how do you compete against some of these other brands that are in the marketplace? And really, actually, we take a lot of inspiration from some of these brands that have done some really awesome things in building and innovating in the space and really educating the consumer.

But what we did notice is that most of them had the same or very similar business model. And that relied on building this network. And so you had this network effect. And what I mean by that is, they would have certain retailers on the platform. And customers could use their product at those retailers.

And so similar to what we saw something like Zoom due to Skype, you can innovate with technology to completely circumvent this network effect and, in fact, actually use it against the incumbents to a large degree. And you can grow significantly faster if you do that. And so that's what we've done.

And so our unique value proposition and why this resonates with our customers so much is that we go direct to the customer, completely bypass these network effects, and allow the customer to pay over time anywhere they like for anything. And that truly is quite unique in the space. And this is why we're seeing the growth that we have today, as you mentioned superseding a million customers in just under 13 months. But more specifically, the type of retaining usage we're seeing is phenomenal. People use Zilch more times in a month than they use some of these other services in a year.

ZACK GUZMAN: Yeah. And so, I mean, it's also interesting to see all these companies going up against credit card companies or, I guess in your case, kind of partnering with Mastercard. But the whole idea here is to kind of shift away from fees and everything else attached to carrying a balance on a credit card, right? And you guys go about that. Explain how you guys make your money in this too. I believe you kind of charge a bit of a fee to the retailer, but less so than, I assume, credit card companies would pay. And then on the consumer side, they get to gain by having lower fees as well relative to a credit card. So talk to me about that.

PHILIP BELAMANT: That's very true. So what we've done really here is we're harnessing purchasing power. And so what we do is really-- brands are always looking for new customers and, obviously, to have returning customers. And so retailers are really happy to pay a commission to Zilch for a sale if we can bring them that customer and actually help that customer check out.

And that's really, effectively, what we are doing. And so what we do is, as the network builds, like any good network, it gets stronger as it gets bigger because the purchasing power gets larger. We aggregate that and obviously sell that to retailers. And they will pay for access to the customer base we have to spend at their stores.

And so retailers will pay a commission per sale. And this is how we amortize the cost of the credit so that the customer doesn't have to bear the cost at all. And that's really how this is working today.

ZACK GUZMAN: Yeah. You bring up credit. And it brings to mind credit scores. Before the show today our producers and myself were having a chat about what potential risks in this space might look like. When you talk about getting a credit card, you've got to go through some hoops and get your credit score checked. I mean, what are the risks here in kind of what you're offering? I don't know if it attracts a less creditworthy customer who might not be able to get a credit card. But what do those risks look like in terms of not being able to collect maybe on some of the installments that customers might have to pay with you guys and the other buy now, pay later options out there?

PHILIP BELAMANT: Well, if we step back a moment quickly on this one, Zack, I think the reality is this is a fixed sum lending model. And it's so different to what you see in running credit. You mentioned credit card earlier.

And fundamentally, we all know now that the running credit model, the traditional credit card model is actually based on overlending. And the reality is, these providers want to lend a customer enough money that they cannot afford to repay on time. And this way, they can charge you fees, interest, and retrospective fees and interest. And that's the problem with running credit.

Fixed sum credit, which is what BNPL is, is completely the opposite. We make a one-off fee when you transact. And so we are incentivized to responsibly lend to everybody. We want them to pay on time every single time. Otherwise, it actually just costs us money and eventually becomes loss-making for us.

So as a company, we fundamentally align with the interest of the consumer. And that is that we do not want to over-lend to the customer. We want to make sure our technology is leading edge. We're using technologies like open banking, of course, soft credit checks. We're doing our own proprietary scoring. And we're using all of that to make sure we give the appropriate amount of money to our customers. So that they are never late.

And this really is resonating. You can see this in the numbers. If you compare average bad debt losses today for most BNPL against credit card companies or traditional lending, it is significantly less. You're talking less than a percentage point against ongoing spend. And so that really is the fundamental difference between the models. And we certainly see that the MPL performance is phenomenal.

ZACK GUZMAN: That might be another key differentiator then to focus in on here, as all these companies continue to grow, what those metrics look like. And I'll be interested to watch too. You got to come back when you kind of roll out here in the US. Want to hear how that's going once you're over here and across the pond. But for now, Philip Belamant, appreciate you coming on here, the founder and CEO of Zilch. Congrats again on the latest round, sir.