‘NEW YORK—A lease-to-own startup called Kafene has raised millions of dollars as it works to build its niche and respond the proliferation of buy now, pay later (BNPL) offerings in the market.
The company is taking aim at underbanked consumers who don’t have access to traditional credit, and recently raised $18 million in a Series B funding round, Tech Crunch reported.
While there are similarities to the buy now, pay later approach to making purchases, Kafene CEO Neal Desai told Tech Crunch his company’s model is different in a few ways.
One of those difference, Desai said, is that while many argue that BNPL is just another form of debt just in a different package, Kafene’s agreements are “debt-free.” Another difference, he said, is that BNPL is often used for more “nice-to-have” purchases, while lease-to-own is primarily for “must have” buys, like refrigerators or tires, for example, he told Tech Crunch.
The Model’s Premise
“Kafene’s model is based on the premise that at the point-of-sale, the prime consumer will probably go with BNPL, while the subprime consumer doesn’t have the credit score to do so and would typically do lease-to-own as their alternative financing mechanism,” Tech Crunch reported.
Kafene, according to Desai, is out to boost financial inclusion by helping consumers who don’t qualify for credit cards a “flexible and affordable” option to make larger, necessary purchases. The company said it partners with merchants — currently mostly smaller and medium-sized retailers — to offer the lease-to-own option at the point of sale.
Other Point of Difference
According to Tech Crunch, the startup’s model also differs from BNPL in that if a consumer decides after a few months that they can’t afford, or simply don’t want, a leased item, they may “give it back” with no penalty. In contrast, with BNPL you can only return a product based on the individual merchant’s policies.
“So, in essence, a Kafene user will have paid for using an item for however many months they were in possession of the product,” Tech Crunch said.
The advantage for merchants, the startup said, is that they are able to close more sales, leading to increased revenue.
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