In the era of fintech giants, neobanks, and modern payment processors, the buy now, pay later (BNPL) model has picked up speed in recent years. While it has been around for some time now, new startups are joining the industry, aiming to offer the next big thing for customers.
Zilch is one such company that helps customers to buy products online with the option to pay later. However, Zilch wants to offer something different to other names in the industry.
In this Disruption Talks interview, we speak with Philip Belamant, CEO and Founder of Zilch, to learn more about why this solution is different. Philip takes us through some of the ways Zilch challenges the buy now, pay later model and what the future holds for this space.
What is buy now, pay later?
Buy now pay later (BNPL) is a financing solution that allows customers to make purchases online with the option to pay at a later date or over a period of time.
BNPL solutions like Zilch and Klarna give customers a little breathing room, so they don’t have to pay in full for a purchase at the point of sale. Customers can benefit from extra time and spread those payments over weeks or months instead.
BNPL solutions are sometimes offered on online checkout pages, or you can sign up for them yourself.
Filip Sobiecki: Could you give us a little personal backstory?
Philip Belamant: I’ve always been a tech entrepreneur. I studied artificial intelligence and mobile development at university.
When I left, I started my first company in mobile gaming. The idea was that you could log in, compete with friends, and buy credit to play. You could also transfer credit from one person to another.
What we realized was that people stopped playing games but were still transferring this credit. We were perhaps not the best game production house, but we had built a peer-to-peer mobile payments platform. We got rid of the games and kept the credit transfer part of the business. That grew into a success, and we rolled it out to about 22 African countries.
I eventually became interested in the buy now, pay later space while living in the UK. There were already some big companies doing it, but big companies cannot move fast. I wanted to know if I could deliver a service like that, but with newer technology.
What does a day in the life of a CEO of Zilch look like?
Every single day is different. Things move fast in this company. In terms of how I carve out my time, I like to spend a lot of time on product strategy with the product team. Aside from that, I spend time with my co-founder and stakeholders talking about corporate finance strategy.
You’ve hired some big names in the start-up world. What is your secret?
I think believing in our own vision certainly helps. We also recognize that we’re all just people. It doesn’t matter if you’re the ex-CTO or CEO of a big brand. We like to get a sense from people that they truly believe in what we do. We also genuinely believe we can be successful, and I think people resonate with that.
Most BNPL solutions rely on the merchant as the middleman. Zilch does this a bit differently. Can you explain how?
Big names like Klarna are great, but they’ve been around for 15 years. We want to come along and do it better by applying the latest and greatest technology.
Look at what Amazon did. It started as a successful online book shop. They built a delivery infrastructure that could have gone a different way. They could have approached other bookshops and offered a delivery service. Instead, they went straight to the customer rather than relying on other companies. That’s essentially what Zilch does.
Zilch has a direct relationship with the customer. We intend to do everything we can to make the customer experience amazing.
The fundamental difference between Zilch and the traditional BNPL companies is that their customer is the merchant.
They’re trying to bring the merchant more sales. We are, instead, trying to bring our customers a better way to manage their cash.
How do you assess affordability or creditworthiness?
The question that comes up is how do you assess whether someone is creditworthy? In traditional lending, the credit bureaus were asked what they thought of the customer. This makes it tougher for younger people with minimal credit history.
We need to change the way we assess not creditworthiness but affordability.
Relying on credit bureaus to tell us someone is creditworthy is like driving a car looking in the rear-view mirror.We prefer to look at whether the customer can afford this today. We use a combination of soft credit checks and open banking data, and created our own proprietary scoring system. Our analysis looks at whether the customer can afford this payment today, another payment in two weeks, and so on.
One of the arguments against buy now, pay later is that if someone needs to split a $17 purchase into four, it means they can’t afford it. We don’t agree with that.
People aren’t using Zilch or Klarna because they can’t afford things. They’re doing it to better manage their cash flow. It makes it easier to manage peaks and troughs in their cash flow cycle.
Would you say that what Zilch provides is access to extra liquidity?
Yes. Traditionally, very low-cost credit is reserved for the wealthy because banks will give them the money for free or for a very low cost.
We think that every person should be able to manage their cash flow at a very low cost or preferably for free.
That's exactly what we're providing here. It is the democratization of access to free or low-cost credit.
Why were you one of the few financial institutions that headed straight to the FCA to figure out the regulations?
The reality is you can do things the easy way, or you can do them the hard way. Sometimes doing the right thing is not the easy way. We chose to do the right thing.
At the end of the day, this is a debt instrument. It doesn't matter how cool, flashy, or awesome it looks, it's a debt instrument. For that reason, we believed that this should be in the regulated space, and so we worked closely with the regulators.
If you were to expand overseas, do you expect there to be cultural differences?
Absolutely. Even within Europe, each country is different. There’s definitely a big cultural difference between Europe and the US, for example.
You sometimes see businesses head over to America and realize the product simply doesn’t fit there. With Zilch, we’d have to completely change our system to make it more US-friendly because Americans tend to get paid every week or biweekly, unlike in the UK.
We’re working on a launch in the US market, but there is a lot of work to do to get the product ready and localized for an American customer base.
Where do you see the BNPL market heading in the future? Will there be a big consolidation of players like Zilch?
We can already see consolidation happening as some companies are on a buying strategy rather than a building one.
The question here is, what value will it bring to the customer? Are you just trying to undercut the competition to win deals with retailers? Or are you going to focus on value for the customer? I think if you're going to do the first, you're not going to last. If you're going to bring value to the customer, that's different.
Is Zilch likely to become something closer to a neobank with cash management, investments, or insurance offerings?
The short answer is no. We want to avoid this idea of a "super app." I don’t want one app that I use for everything, whether that’s buying gold, fractional shares, or crypto. I quite like knowing I have a different app for all those things.
Instead, we want to ensure we’re 10x better than anyone else when it comes to providing payment over time options. We’re not looking to become a one-stop-shop.
What is your decision-making framework?
I would say two things. One is to always be the last person in the room to speak. When you have amazing people who all have knowledge in different areas, let them speak first. Once you’ve heard them all, you’re more informed and can make a better decision.
My second one is to actually make a decision. It may be wrong, but as long as you can admit you’re wrong, that’s okay.
If you had a magic wand and could give every 12-year-old in the world a new skill, what would it be?
I would say the ability to sell. If you can sell, you can do anything you want. Everyone is selling something, even if they don’t realize it.
Another thing I’d say is to not be fooled by successful people and think that it’s down to some secret superpower. Successful people are just people. They are just people who can break a problem down to its fundamentals and understand it and make it better.
This discussion is part of our Disruption Talks recordings, where we invite experts to share their insights on winning innovation strategies, the next generation of disruptors, and scaling digital products. To get unlimited access to this interview and more expert content sign up here.