LONDON–Buy now, pay later (BNPL) platform Zilch has launched what it is calling a "2.0" business model in the United States that the company said won't charge late fees or penalties, while offering cash-back rewards to consumers.
With more than two-million customer sign-ups in the United Kingdom, according to Zilch its new model is also aimed at addressing some risk factors of BNPL that were investigated by the Consumer Financial Protection Bureau (CFPB) at the end of 2021, according to Business Wire.
Zilch said it is “accepted everywhere Mastercard can be used" and has more than 150,000 customers who are pre-registered for its service in the United States.
As CUToday.info reported earlier, the CFPB has sent a letter to BNPL providers Affirm, Afterpay, Klarna, PayPal and Zip seeking information on the risks and benefits of BNPL, citing concerns that their business models were unclear to consumers, charged fees that were too high and allowed Americans to rack up too much debt without being able to repay it.
Zilch's new BNPL model would offer 2% instant cash-back rewards and would work directly with consumers, rather than partnering with retailers while charging zero interest and zero fees, according to BusinessWire.
‘Set Up to Fail’
"[Consumers] are being set up to fail and need more flexibility, especially during a cost of living crisis and a time of surging inflation, to pay for goods and services how and when they want – with a system that avoids late payments and unnecessary, onerous fees," Zilch CEO and Co-Founder Philip Belamant said in a statement.
As CUToday.info has further reported, various BNPL providers have been partnering with retailers to allow shoppers to split the cost of their online purchases into multiple installments at checkout. “These interest-free payments are then typically due within a few weeks after the time of purchase,” noted Fox News. “Missed payments, however, can result in late fees or other penalties. The CFPB's investigation was aimed at determining if BNPL programs are doing more harm than good.”
According to Zilch, it is using "a blend of Open Banking technology" and soft credit checks alongside its own data to view consumers' financial health. The company is also partnering with Experian to report payment plans, enabling BNPL providers to keep track of their payment plans. The three credit bureaus — Equifax, Experian and TransUnion — recently began calculating BNPL payments when determining a consumer’s credit score, the BusinessWire report stated.
‘Unacceptable Level’
Late fees on BNPL products continue to accumulate, Zilch CEO Belamant stated, and have reached an "unacceptable" level. He added that in 2020 alone, American shoppers shelled out $120 billion on such charges.
"They are being set up to fail and need more flexibility, especially during a cost of living crisis and a time of surging inflation, to pay for goods and services how and when they want – with a system that avoids late payments and unnecessary, onerous fees," he said, according to Fox News.
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