“Buy now, pay later” is one of the fastest-growing areas of fintech.
It’s a form of credit that allows customers of major retailers to pay for items in installments, often with no fee attached. Companies like Afterpay, Clearpay, and — notably in Europe — Klarna have been on a growth tear in recent years.
There are questions about the affordability of these services and lack of regulation in the space. Klarna, Europe’s most valuable privately owned fintech, has more than 11 million customers but has been forced to answer questions on whether its product increases indebtedness, particularly for more vulnerable consumers.
Millennials might be increasingly wary of BNPL’s impact on their credit scores, and new startups have sprung up to disrupt the model again. To that effect, the London-based Zilch has just raised its second funding round of 2020, a $30 million Series B.
Zilch, founded this year, provides an over-the-top BNPL product that lets customers spread payments with zero interest for a period of six weeks wherever Mastercard is accepted.
Customers can use a Mastercard-linked payment card to purchase items in installments at a chosen retailer. Unlike Klarna and others that are integrated into the retailer, Zilch connects to a user’s account through open banking to extend credit.
The company was born out of a need to improve accessibility for end users and also to make BNPL more affordable, Zilch’s founder and CEO, Philip Belamant, told Business Insider in an interview.
“There’s a disconnect between the incumbents and the end consumer because companies like Klarna are effectively merchant-acquiring businesses,” he said. “That misalignment is why we’ve built Zilch the way we have — as a customer there could be five separate point-of-sale providers on a website, which is confusing.”
Zilch is still open to the same questions plaguing Klarna, but it hopes to be a more affordable and clearer alternative.
As calls for regulation of the BNPL sector grow in the UK, Zilch has gained approval from the country’s national financial regulator (something that some newer fintechs decline to do) with consumer-lending authorization, making it one of the first BNPL fintechs in the UK to do so, the company says.
Klarna’s CEO recently told the news site Sifted, which covers European startups, that smaller fintech startups worried him and that Zilch hoped to have the regulatory edge ahead of expected disruption from Brexit.
“Klarna is providing credit to some people who might not have had it before, which is great, but how affordable is that?” Belamant added. “By taking this step forward with the FCA we are asking them, ‘How can we do this best?’ and we hope that it will fall in line with what the FCA expects going forward.”
Despite raising a round during the summer, Zilch was in a positive position to raise again, Belamant said. The company had committed numbers of where it expected to be by February 2021 but exceeded those numbers by November, Belamant added. “Our OTT model allows us to scale and integrate quicker than others,” he added. The company raised the funding from Gauss Ventures and the Moneysupermarket.com cofounder Simon Nixon in just three weeks.
Zilch says it has 160,000 users and is adding 30,000 customers a month. The company plans to use the funding to grow its headcount to about 75 from 35 in London and, possibly, to expand outside the UK next year.

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