Intro
Zilch is a UK-based financial technology company specializing in “Buy Now, Pay Later” (BNPL) services that allow consumers to make purchases and pay in instalments. Zilch’s platform offers a virtual Mastercard that enables users to make purchases and spread payments over time without incurring interest and a flexible payment option. The company has gained significant traction in the UK, attracting millions of customers and expanding its services.
Founding Story:
Zilch was founded by Philip Belamant, Serge Belamant, and Sean O’Connor in 2018. The founders identified a gap in the financial services market, to create a fairer and more transparent way for people to access credit without the hidden fees and interest rates that are typical of traditional credit cards—aiming to place customers at the forefront of financial innovation. They saw an opportunity to improve the financial well-being of consumers by offering a simple, no-interest payment plan that could be used in-store or online. Zilch officially launched in September 2020 after a successful development phase and quickly gained attention for its innovative approach to the (BNPL) market.
Business Model Analysis:
Zilch operates on a straightforward business model:
Zilch’s business model is unique compared to traditional Buy Now, Pay Later
(BNPL) providers. Here’s a breakdown of how it works:
1. Payment Options:
Zilch offers two main payment options to customers:
• Pay over six weeks: Customers can spread their payments over
six weeks without any interest.
• Pay now: Customers can pay immediately and earn up to 2%
cashback rewards.
2. Revenue Streams:
Customer Fees: Zilch charges fees to customers for certain services. Merchant Fees: Merchants pay fees to Zilch for offering the BNPL service to their customers.
Interchange Fees: Zilch earns interchange fees from its debit card transactions.
(a) Partnerships:
Zilch collaborates with thousands of online stores, including major retailers like Amazon, Best Buy, eBay, Nike, and Zara. These partnerships allow customers to use Zilch’s payment options at a wide range of merchants.
(b) Credit and Rewards:
Zilch connects to a user’s account through open banking APIs to extend credit. Customers can also earn rewards and cashback when using Zilch’s services.
3. Regulation and Compliance:
Zilch is regulated by the UK’s Financial Conduct Authority (FCA) and has obtained a consumer credit license through the Regulatory Sandbox Programme.
4. Growth Journey:
Zilch’s growth trajectory has been impressive since its launch. Here’s an
overview of its journey:
2018 (Foundation): Zilch was founded by Philip Belamant, Serge
Belamant, and Sean O’Connor in London, UK.
2019 (Early Development): The company was accepted into the UK’s
FCA Regulatory Sandbox Programme, allowing them to trial their product.
Launched a beta version for external testing in August.
2020 (Official Launch): Obtained a consumer credit license from the
FCA in April and officially launched its app to UK consumers in September.
They secured Series A funding of £15 million.
2021 (Achieving Unicorn Status): Zilch’s valuation surpassed £500
million in April. Secured £83 million in Series B funding from Goldman Sachs and DMG Ventures, along with a £125 million debt facility from
Goldman Sachs. By November, Zilch had 1 million registered users and a
$2 billion valuation, becoming the fastest FinTech company in Europe to
attain double unicorn status.
2022 (US Expansion): Zilch expanded into the US, opening an office in
Miami and appointing Albert Periu as CEO of Zilch USA. They grew their
Series C funding to $110 million; their customer base grew to 2.5 million.
2023 (Milestones): Zilch continued to grow, reaching 3.35 million
registered customers with over £1.5 billion spent using the “Pay Now” debit
product, resulting in £300 million in customer rewards and
savings. Collaborated with UK debt charity Step Change to integrate
support services into the platform.
5. Financial Overview:
Zilch Technology Limited has demonstrated significant financial growth over the years. Here’s an overview of its financial performance:
Revenue Growth: Zilch reached an annual revenue of £57.1 million in
2024, with a monthly revenue run rate of £145 million.
User Base: Expanded its customer base to 4.5 million. Approximately
12% of the UK’s 33 million adult working population now holds a Zilch
account.
Transactions: The company handles over ten million payments each
month, with strong user retention and engagement.
Funding: As of October 2024, Zilch has raised approximately $581
million
across 12 funding rounds, encompassing both equity and debt financing.
Zilch’s consistent revenue growth and user acquisition indicate a solid
financial foundation and strong future potential.
6. Lessons Learned:
Starting a BNPL business is a complex but rewarding endeavour. It requires a
combination of financial acumen, technological expertise, and a customer-centric approach. Here are some key takeaways:
Embrace Innovation: Zilch’s innovative Buy Now Pay Later (BNPL)
model has been a significant driver of its success. Being willing to think outside the box and create new solutions can set a company apart from the competition.
Financial Management: Securing multiple rounds of funding and
managing finances effectively enabled Zilch to scale its operations and
invest in growth opportunities. Sound financial management is essential for
sustainable growth.
Regulatory Compliance: Zilch’s acceptance into the UK’s FCA
Regulatory Sandbox Programme allowed them to trial their product while
ensuring compliance with regulations. Navigating regulatory landscapes
early on can prevent legal issues and build trust with customers.
Global Expansion: Expanding into new markets, like the US, allowed
Zilch to tap into a larger customer base and diversify its revenue streams.
Strategic global expansion can be a powerful growth strategy.
Adaptability: Zilch’s ability to adapt to market changes and customer
needs have been crucial. Being flexible and responsive to feedback can
help a company stay relevant and competitive.
7. How to Start a Similar Business:
Starting a business similar to Zilch requires careful planning, strategic thinking, and a clear understanding of the financial technology industry. Here are some steps to guide you through the process:
Identify Market Needs: Understand the target market and identify the
specific needs and pain points of customers. Study existing BNPL
companies, their business models, strengths, and weaknesses.
Create a Secure Platform: Develop a user-friendly mobile app & web
dashboard. Ensure that your BNPL service is user-friendly and integrates
easily with merchants.
Merchant Partnerships: Collaborate with online retailers and
merchants to offer your BNPL service. Partner with banks and credit
providers to secure funding and manage risk.
Leverage Technology for Risk Management: Integrate AI-based
risk assessment for real-time credit scoring. Implement robust credit risk
assessment processes to minimize defaults.
Customer Support: Provide excellent customer support to handle
inquiries, disputes, and issues. Gather customer feedback to continually
improve your service.
Scale & Expand: Start with one region, then expand to other markets
with strong BNPL demand. Adjust compliance & licensing per country.
Keep innovating and adapting to market changes and customer needs.
Starting a BNPL business is a complex but rewarding endeavour. It requires a combination of financial acumen, technological expertise, and a customer-centric approach.
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