The rise of Zilch has been jaw-dropping by any measure.
The London company has amassed a customer base of nearly 6% of the UK adult population in under two years – twice as fast as any other FinTech – while the extension of its Series C round this summer took its total funding to more than $460m in debt and equity.
That maintained a valuation of more than $2 billion, having already become Europe’s fastest FinTech company to go from Series A to a double unicorn.
It has executed this in a Buy Now Pay Later market already dominated by rivals such as Klarna. But while the valuation of the Swedish giant has dropped dramatically amid a growing backlash against BNPL, Zilch’s apparently more ethical approach has paid dividends.
The company worked with regulator the Financial Conduct Authority as part of its Sandbox Programme from inception and was one of the UK’s first BNPL providers to be granted an FCA licence to perform regulated consumer credit activities.
CEO Philip Belamant, who co-founded the company with Sean O’Connor, says they have put a team in place which understands the value of ‘doing the right thing’.
“A key piece of advice that I’d offer to anyone looking to build a new business is how important it is to hire the right people,” he tells TechBlast. “We’ve grown to over 250 team members today, and at that size naturally you can’t have as much direct oversight of everything that’s happening as you can in the early days of the business.
“You need to have full confidence that your leadership team is making the right decisions – in every sense of that word. Something we prioritise when meeting prospective new hires is how they answer the question: ‘How important is it to do the right thing, even when nobody’s looking?’
“That same ethos has been absolutely key to our growth. We’ve received a lot of compliments from our investors recently following the UK government’s announcement over the summer that anyone offering a Buy Now Pay Later product will soon need to be regulated.
“That has made our decision to work with the FCA when we founded the business, and the full consumer credit licence we obtained back in 2019, look like a far-sighted strategic masterstroke, because we’re now ahead of the curve.”
Zilch’s investors include Ventura Capital, Goldman Sachs Asset Management, Gauss Ventures, DMG Ventures, M&F Fund and Limited Ventures, while its partners include Cross River, Checkout.com, Cashflows, Experian, GPS, Monavate, Marqeta, Mastercard, Onfido, Provenir and Socure.
Belamant jokes: “They’re a little disappointed when I confess that we had no inkling what the government or the FCA was going to do about the regulation of BNPL in the future!
“But we believed then, as we do now, that to build the best possible payments product and offer customers the best possible experience, we had to provide them with the full protections that come with being FCA-regulated.
“If your primary concern is to do right by your customers, you’ll find that your decisions get vindicated eventually.”
Zilch opened a base in Miami this summer and launched with more than 150,000 pre-registered customers in the US market. It said at the time that growth in that market was rapidly outpacing even that seen in the UK.
The company claims its direct-to-consumer model allows it to build relationships with its customers and scale significantly faster than its competitors. It allows both debit – which accrues up to 2% instant cashback and rewards – and credit transactions on its platform, with no interest or late fees.
Belamant was recently named EY’s Entrepreneur of the Year 2022 for the London and South East region of the UK. He has launched several thriving payment industry businesses during his career, with early success in the emerging African markets.
“In building Zilch, we were following a similar path to what I’d done with my previous business in Africa: creating a new mobile payments product that makes use of existing infrastructure to promote financial inclusion,” he explains.
“My first company, which started in South Africa, allowed millions of people on low incomes, without access to bank accounts, and who kept their funds in cash, to borrow prepaid airtime – which served as a kind of virtual currency – and then make repayments via the same mobile network operators. In time this meant that they could pay for bills, food and other items from their phones.
“Zilch, of course, is a very different company in many ways, but we’re also using existing infrastructure – in this case, the Mastercard payment rails – to offer customers a new and more rewarding way to pay. Our customers can go anywhere that Mastercard is already accepted and either earn cashback in the form of instant rewards on debit spending or toggle over to use Zilch credit spread repayments over four instalments with zero-interest.
“I’ve found it to be a productive way of thinking about building a truly disruptive product – how can you transform customer behaviour without having to overhaul the entire ecosystem of existing service providers and start from scratch?”