COVID-19 has led to huge increases in the number of shoppers signing up for buy-now-pay-later accounts, fast-tracking the growth of many BNPL providers
By Exec Edge Editorial Staff
Many fintech firms have seen enormous growth in account sign-ups over recent months and this growth is hardly surprising – COVID-19 has affected many of us financially, and shoppers are turning to BNPL schemes to spread the cost of their shopping during this difficult time, especially in the run-up to holidays. Meanwhile, the pandemic has also led to a rise in online shopping thanks to lockdown store closures. As a result, BNPL providers around the world are accelerating towards unicorn rankings, and competition is high.
Out of the hundreds of financial technologies on offer, here are seven BNPL providers that we think have what it takes to become the next fintech unicorn.
- Zilch (UK)
Zilch’s solution is one of the fastest growing in the UK BNPL market. As the first over-the-top BNPL product on the UK’s fintech scene, over 100,000 shoppers have already signed up for a Zilch account with no interest or late fees, shoppers use Zilch to spread their payments over six weeks both online and in-store.
As Zilch is partnered with MasterCard, shoppers can use Zilch’s virtual card to check out at any MasterCard accepting retailer – including Amazon, eBay, Matalan, Boohoo, and Topman. While most BNPL schemes work directly with the retailers, Zilch partners with customers to ensure that users can’t overborrow by monitoring each shopper’s affordability through open banking and artificial intelligence.
Zilch is growing rapidly and has recently raised more than $12-million to accelerate the roll out of numerous features including its Zilch Now and Zilch Boost feature, which over 65,000 shoppers have signed up to access. We think these features may be a game changer for BNPL as it instantly enables would-be shoppers to pay now or later or top up their credit to over £200 using funds from their bank accounts at any retailer of their choice.
- Splitit (US, Australia, & UK)
Splitit adopts a similar BNPL model to Zilch, only the system requires shoppers to use their existing credit cards to finance smaller payments over extended periods. While we doubt this approach suits customers who are looking for fee-free solutions or customers who aren’t eligible for credit cards, Splitit does give customers more control over their purchases. The BNPL provider doesn’t partner with as many high street stores as some of its competitors, but it does offer lots of choices when it comes to repayment schedules. The firm’s payment installment options span all the way from three to 24 interest-free payment installations. Although the company doesn’t charge interest fees or late fees, shoppers need to be aware that they are still subject to any fees associated with their linked credit card.
- Affirm (US)
San Francisco’s up-and-coming BNPL enterprise Affirm operates payment systems on a loan basis. Though a popular option with shoppers, we prefer fee-free BNPL systems as these are safer for cash-restricted shoppers. Having said that, Affirm’s loans start at $28.07 per 18 months, allowing shoppers to use Affirm’s flexible payment schedules when shopping with a host of retailers. The schedules are designed to avoid debt through manageable monthly payments. Although shoppers have to pay to use this BNPL service, Forbes reports that Affirm has doubled its US users over the last year. Thanks to the system’s instant loan approvals and no reliance on credit history, many shoppers in America sign up for this provider.
- GoCardless (Europe)
GoCardless adopts the BNPL model for small and large businesses instead of individual customers. While we find that its simple interface makes payment set-ups easy to schedule and manage, the system is particularly suited to companies that make many direct debit payments (rather than individual shoppers like me). GoCardless does support ad hoc and variable payments, but it’s mainly geared towards subscription transactions.
Firms can also integrate GoCardless with their invoicing system to take the friction out of payments and automate transactions. There are a couple of fees to be aware of: business payments made within the UK incur a 1% fee per transaction, and international payments incur a 2% fee per transaction.
- FuturePay (US)
One of my favorite things about FuturePay is the MyTab feature, which allows shoppers to secure high-value items instantly and pay later. Perfect for quick-sell-out items such as concert tickets, sale products, and brand-new releases, customers can collate shopping lists throughout each month and pay on a set billing date. The only catch is that customers need to pay $5 for every $500 balance.
- QuadPay (US)
QuadPay enables shoppers to split any payment into four installments, whether shopping in-store or online. With an instant approval system in place, customers can split the value of any item over six weeks, no matter the price. The consumer-centric platform makes transaction processes seamless and accepts all major cards. Meanwhile, the plug-and-play integration allows partner merchants to benefit from improved AOV and conversion rates, encouraging a higher level of repeat purchases from loyal customers.
- Zip Pay (Australia)
Zip Pay is another BNPL provider that allows shoppers to spread the cost of their purchases both in-store and online. Customers use a six-digit code to secure a payment schedule upon checkout. The BNPL provider offers three credit limits, which different shoppers are eligible for depending on the information provided during the sign-up process. While we find that the system does provide an effective, interest-free line of credit, there is one small catch. You have to pay a small servicing fee if you have an outstanding balance at the beginning of the month. Customers must make a minimum monthly repayment on outstanding balances and pay a late fee if they do not pay the minimum repayment.
Finding the Next Fintech Unicorn
With so many BNPL providers rapidly expanding their reach during covid-19, there is a high level of competition. However, out of the countless options for BNPL products outside the US, we consider Zilch as a potential bet for unicorn status. Its partnership with Mastercard means that it’s working in partnership with the big credit card incumbents rather than challenging them. And if Zilch scales its UK BNPL solution successfully, the firm is well-positioned for future markets.
Zilch’s mass of five-star reviews have been filling TrustPilot and other recommended review sites over recent months as increasing numbers of shoppers reap the BNPL system’s benefits, with a steadily increasing waiting list for a Zilch account with Boost benefits.