How Fintech Unicorn Zilch is Distinguishing Itself in the Buy Now Pay Later Sector

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The Buy Now Pay Later (BNPL) sector has become a hotly contested space in the financial industry. As a result, companies have been working hard to distinguish themselves from the competition. In this pursuit, however, a prominent brand has emerged as one of the most exciting companies to watch — Zilch. Through a series of smart moves, the UK-based BNPL provider has achieved a growth rate of more than 100,000 customers per month, provoking comparisons to Klarna and Amex. We’ve highlighted some of these actions below to showcase how the company is rising in its field and establishing itself as a fintech unicorn.

How Zilch Works

Before diving into some of the choices that have set Zilch ahead of competitors, let’s first take a brief look at how the service works. The fintech company strives to offer customers a newfound sense of freedom and flexibility when making purchases. Rather than paying for the entirety of a purchase at checkout, the platform allows users to pay only 25% upfront. Users are then able to pay the remaining balance in 25% increments every two weeks until the purchase is fully paid off. At a time when online shopping has taken off and more consumers than ever are turning to innovative payment solutions, the platform has drawn widespread interest.

Some of the focus of this interest has centered around fees. While competitors have been known to charge usage fees, the BNPL provider has pledged to provide its services free of charge to those who use its platform. In order to create revenue, the company instead passes along a small fee to the vendors from which customers make their purchases. The end result is a seamless BNPL experience that allows users greater flexibility without increasing the cost of the products they purchase.

Over-the-top platform

Another way in which the fintech company is pulling ahead of competitors is through its use of an over-the-top service model to help bring greater ease of use to its platform. This means that the company’s platform runs without regard to the existing payment structure that a merchant may have in place. This stands in contrast to other payment solutions providers that require users to shop only at partner locations, vastly cutting down on options and constraining a consumer’s buying patterns.

Zilch accomplishes this by providing users with a virtual card that can be used at any online retailer that accepts Mastercard. The company then informs users of how much they have available to spend at the retailer of their choice. When it comes time to make a purchase, users simply enter the details of their virtual Mastercard at the payment method section and checkout as they would with any other payment option. The service’s platform takes care of the rest, charging users their initial smaller percentage of the purchase at checkout and allowing them to pay the remainder over time.

The way the platform interacts with a consumer’s existing purchasing experience has helped draw users to the platform. With its over-the-top setup, users can continue their buying habits as usual and simply avail themselves of the greater freedom and flexibility that comes with the BNPL service.

Zilch Doesn’t Affect Credit Score

One thing that has been a hurdle for other BNPL providers has been the way they interact with a user’s credit history. Many users have been reticent to sign up for a service that could pull a so-called hard background credit check that may have a negative impact on their credit score. This type of negative impact can occur in some instances such as when numerous hard credit checks are performed in a short period of time. Zilch, however, pulls only a soft background credit check. This type of check helps the company determine affordability while having no impact on a user’s credit score.

The same is true when analyzing the company’s service as a whole, which also currently has no effect on user credit scores. The company has plans to allow users to opt-in to credit reporting to boost their credit scores when they’re keeping on top of payments. The combination of a soft background credit check and no impact on a user’s credit score makes the service especially appealing to consumers who want the flexibility of BNPL without the potential for risk that may come from a competitor or traditional credit card.

Fully Regulated by FCA

In addition to allaying user concerns over credit score impact, the fintech company has also taken numerous steps to bolster its reputation for integrity. Much of this reputation has been earned through its work with the Financial Conduct Authority (FCA) — the conduct regulator for nearly 60,000 financial services firms and financial markets in the UK. By taking part in the FCA’s regulatory sandbox program, the company has been able to test its innovative platform with real customers and build out its offerings in a manner that has received full regulatory approval.

That regulatory approval has not only earned the company a solid reputation, it has also allowed it to stay in continuous operation while its competitors have met regulatory hurdles. The most recent and public example of this came in February when the FCA tightened its regulations designed to protect consumers. As a result, numerous BNPL companies found themselves in breach of new regulations and were forced to scramble to change their policies. In fact, Zilch was the only company that was still in compliance with the FCA’s regulations immediately following the February announcement. This high-profile example has shown the emphasis the company places on its work to craft a reputable business model.

While BNPL services have cropped up in droves in recent years, not all offerings in this sector are created equal. Through a focus on user experience that operates over-the-top of a consumer’s existing purchasing habits, Zilch has risen to the top of its class. An additional drive to leave no impact on credit scores and to follow all regulatory requirements has also helped establish the brand’s sterling reputation. With these factors taken together, it’s perhaps unsurprising that the company has been dubbed by many as the next fintech unicorn in the BNPL sector.