Ventura Capital and Gauss Ventures led a $110 million Series C fundraising round for Zilch, a buy now, pay later (BNPL) startup. Another evidence that the BNPL boom isn't going away anytime soon is that the company's worth has increased from $500 million to $2 billion over this time.
B2B payments specialist Billie raised $100 million in Series C funding from Dawn Capital, a leading BNPL investor, and Klarna, a leading fintech startup, last month
By copying Sweden's Zilch and building out from its Miami headquarters, Zilch plans to expand in America similarly.
To set Zilch apart from other BNPLs, it was awarded a consumer credit license by the FCA, the UK's financial regulatory agency, before its competitors. Because it allows customers to pay at any Mastercard-enabled merchant rather than through integrated checkout alternatives, it has a unique selling point. Hopes it sets them apart from the other BNPL members.
The CEO of Zilch, Philip Belamant, told CNBC that the other BNPL enterprises were "simply copycats," not poor businesses. "In our opinion, you can't show up late and then do things the same way following others."
What is the BNPL?
BNPL, or buy now, pay later, is a payment plan that allows you to spread out the cost of a purchase over time. Things as diverse as simple purchases in stores, services such as medical and vet expenses, and more expensive items like home improvements or solar panels can all be made with a 'Buy Now Pay Later' option these days.
With BNPL, your service provider pays for your purchase on your behalf. Afterward, you pay back the BNPL provider in installments over a pre-determined period.
All of the BNPL providers have their own set of restrictions for installment payments, as well as the length of time you must pay the entire sum.
When you utilize BNPL, there is no interest to pay. BNPL service providers, on the other hand, levy a variety of costs. You could have to pay a price to use their service, for example. In most cases, late fees are imposed if you fail to pay your installment on time, so you must read the terms and conditions before signing up and keep an eye on when payments are due.
BNPL providers that are members of AFIA's Code of Practice can be identified by this 'tick'. The Code of Practice binds BNPL providers that have signed on to it to nine promises or pledges regarding how they will handle you as a customer.
According to the Code of Practice, BNPL does not fulfill the definition of an installment plan. However, several similar plans qualify. BNPL Providers allow you to split payments directly with some companies, and credit card products that are essentially installment plans also fall into this category.
According to the Code, a BNPL product or service is one that:
A more short-term product or service that allows customers to pay for goods or services in equal installments over a shorter period. A product or service that is an ongoing credit contract for the purchase of goods or services is free of additional charges for consumers.
The payback schedule for each purchase can be fixed or require a minimum payment each month. It's possible to get several lines of credit advanced to you.
It's only possible to charge up to $125 per year, with the first year's fee being limited to $200, and each year after that to $125. The customer makes purchases from a merchant or retail partner, and the BNPL provider pays the merchant or retail partner for the purchase (minus merchant fees). The customer then repays the Buy Now fee.
A BNPL Product or Service does not include the following sorts of products and services, or any arrangement of the same kind, for this Code:
Non-consumer goods and services supplied to individuals or businesses for non-consumer purposes (e.g. to be used for a business purpose). In s5(4) of the National Credit Code, 'predominant' means the purpose for which 'more than half of the credit is meant to be used, and if the credit is intended to be used to buy goods or services—the purpose for which the goods or services are intended to be 'most used'.
Offerings under the National Credit Code for BNPL Products or Services.
The distinction between a credit card and a BNPL
When it comes to credit cards and the 'Buy Now, Pay Later' form of payment, there are several important distinctions. Look at these real-life situations to illustrate this point:
Credit Cards :
Credit cards are subject to additional fees and penalties.
To be eligible for a credit card, you must have a strong credit history.
Acceptance of credit cards is more flexible than that of debit cards.
Credit cards have a normal interest-free duration of six months.
Obtaining approvals can be a little tough.
The option of paying only the "minimum due" amount is available to you.
On purchases, you can earn cash back, reward points, and airmiles, among other things.
BNPL: BNPL uses a pricing mechanism that is transparent and low-cost.
It is not necessary to have a credit history to obtain a loan.
BNPL services and facilities are offered by a restricted number of e-retailers and fintech companies.
The interest-free credit period can go up to 48 months in some cases.
Approvals will be processed more quickly.
You are required to make the fixed EMI payment on the appointed date.
The surge in the number of BNPL service providers may be traced back to the outbreak. As a result of lockdowns, there has been a growth in demand for e-commerce services, and customers have preferred to split significant expenses into smaller interest-free EMIs, BNPL has emerged as a popular choice for many consumers. Buy Now, Pay Later has a lot to offer, but it is still a loan, and you must be cautious when considering whether or not to take advantage of it. While it is simple to obtain BNPL approval, failing to make payments on time might hurt your credit score. As a result, just as with other loans, you must make sure that all payments are made on time to keep a good credit score.