Buy now, pay later service provider Klarna made its debut on the public market today, which could encourage other fintechs to do the same. The IPO could boost the fintech sector at a time when many mature companies are sitting on the sidelines waiting for the macroeconomic environment to calm, Abdul Abdirahman, a principal […]
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Apple has announced new features for Apple Wallet and Apple Pay. “We’re adding two new ways to pay with Apple Pay online, giving customers around the world the ability to redeem rewards and access installments from their banks and card providers,” Craig Federighi, senior vice president of software engineering, said during the tech giant’s World […]
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The new Consumer Financial Protection Bureau rule putting buy now, pay later providers in the same category as credit card issuers can fuel the industry’s growth, experts say. The rule, published May 22 to take effect 60 days later, “makes the model more sustainable because [BNPL] has been around for a long time, it has […]
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Block’s Cash App profit and number of users grew in the first quarter as the payments provider integrated buy now, pay later provider Afterpay. Block, formerly Square, acquired Afterpay in August 2021 for $29 billion but it has had issues integrating the solution with its Cash App Card debit card, Chief Executive Jack Dorsey said […]
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Many people in the U.S. associate buy now, pay later (BNPL) with the ability to pay off a clothing purchase or a Peloton in multiple interest-free installments. It’s also associated with the growing concern that the strategy makes it easier for younger adults to find themselves in debt after spending beyond their means.
But that’s only one use case for BNPL, which are essentially just small interest-free loans. There is a growing group of startups looking to expand the BNPL model into other categories that are arguably more important than buying a new Apple Watch. Qomodo is one of them.
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Klarna’s Q3 2023 results are the latest in a growing list of evidence that the Swedish fintech giant is evolving from a loss-making unicorn to a durable company ready for the public markets.
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It wasn’t that long ago that Klarna had its valuation slashed by around 85%. At the time, the repricing made its ascent seem a bit specious, putting a question mark on the company’s value.
How quickly things change. While Klarna’s numbers looked like standard unicorn fare in late 2022 (replete with unappetizing losses), the company managed to post stronger results as the year went along, masked somewhat by its full-year metrics.
That spate of good news continued this year, with the company reporting improving credit results and even a profitable month. And it seems that after laying off staff and working to control costs, the good-news train is still rolling along at the company.
Today, we’re diving deep into Klarna’s Q3 results with a focus on its return to profitability. If you care about BNPL as a category, e-commerce, or even just fintech writ large, you need to understand how Klarna is performing. To work!
In the third quarter, Klarna reported revenue of 6 billion Krona ($549.9 million), up about 30% from 4.6 billion Krona ($421.6 million) in the third quarter of 2022. The company also reported an operating result of 130 million Krona ($11.9 million), a massive improvement on the 2.12 billion Krona ($192.6 million) loss a year ago. (All currency conversions use current SEK-USD values.)
How did the company manage to both increase revenue and swing to profitability in just one year? Several efforts culminated in the improved numbers we see above:
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Payments fintechs are leaning on technology as consumers look to them to alleviate payments pressure in today’s high interest rate environment.
“The payments space today is in a stress test,” payments fintech Sunbit’s Chief Executive Arad Levertov, tells Bank Automation News on this episode of “The Buzz” podcast, noting that consumers are struggling to make payments and payments fintechs are struggling to scale.
Sunbit uses machine learning, AI and software to offer payment options to customers through retailers, according to Sunbit. The tech provider connects to retail APIs to collect data on performance of their technology and simultaneously offers buy-now-pay-later capabilities, a credit card and point-of-sale lending.
Sunbit customers include dental office Dossett Dental, automotive retailer Highline Parts and Service Center and vision eyewear retailer Henry Ford OptimEyes, according to the Sunbit website.
As payments providers help consumers, they also want to ensure they can scale. To be sure payment companies can accomplish both, Levertov says they should ask themselves:
Listen as Sunbit’s Levertov discusses with “The Buzz” how to navigate a high-rate environment with consumers and technology at the forefront.
The following is a transcript generated by AI technology that has been lightly edited but still contains errors.
Whitney McDonald 0:03
Hello and welcome to The Buzz a bank automation news podcast. My name is Whitney McDonald and I’m the editor of bank automation News. Today is November 2 2023. Joining me is Chief Executive of FinTech Sunit Arad Levertov. He is here to discuss payments disruptors, leveraging AI and Gen AI today and the future of the payments landscape. he co founded Sunday in 2016, and has been in FinTech since 2009. Thanks for joining us.
Arad Levertov 0:30
Thank you for having me. Happy to be here. I’m Arad Levertov. I’m the co founder and CEO of Sunbit. Sunbit is a financial technology for Real Life. We are based in Los Angeles, and we have about 500 employees across the nation. Many people are familiar with the pay overtime functionality, or the Buy Now pay later. And usually the this happens in the online sun beat we have two main products. The first product is a pair of real time functionality that is used for where people needed the most. So when you go to fix your car, or when you go to the dentist or to to get an eyeglass, we help the customer to get the service they need and pay overtime. We are right now operate in about 7500 locations of car repair services, which is about 40% of the market of authorized car dealerships. So if you go to fix a car in the authorized car dealership, there is four out of 10 chances that you will see us. In addition, we are in dental, as I mentioned that eyeglasses places overall over 20,000 locations, and we are adding five to 700 a month. Our second product is the sun beat card. And the Sunday card is a product that we announced in 2022. And basically brings the best of credit, debit and buy now pay later into the hands of each customers. And the customer can use it in with a physical card, or with a virtual card. In over there, we’ve processed over 300 million transaction and customer uses 60% of the time in everyday purchases like gas, food, and groceries. And basically we allow the customer to choose each transaction, how they want to pay where it’s like a debit, which means paying full credit, paid only the minimum or split into 236 or 12 months like buy now pay later. Our products are focused on the customers, we are inclusive, which means we have to have more customers, and we never charge any fees.
Whitney McDonald 2:43
Great. Well, thank you again for joining us and for talking us through some bit. I’d love to get started with just setting the scene for today’s payments industry. What are you seeing today kind of where to where do we stand within payments today?
Arad Levertov 2:58
That’s a good question. Because when you think about where we are today, you you cannot ignore the macro economics condition. Right. So you know, the Fed increased rates starting last year. And the current interest rate is super, super high, which impacts the entire economy, but mostly the payments and the FinTech companies. So today, when the interest is I customers are struggling more to make payments and customer struggling more to make purchases. And that actually it’s an opportunity and also I call it a stress test for every company, especially companies that are in the payment spreads, which also got impacted by the by the increase in interest rate. And when it when I look at this stress test, each company needs to ask itself like three basic questions. One, do I really add value to consumer? Two? Can I make profit out of it? And three? Can I do it? With the same core values and promises? I promised the consumers the employee like you know, three, four years ago when things were easier. So what does it mean? It means that especially in the payment space, when interest is high in customer struggling, our customers still willing to take my product and pay money for it? In our case, it’s like you know, the customers and the merchant Do they really value needs? Second, can I do it while I my cost is lower than the revenue which is super important these days? And three Can I do it with the same core values and promises? As I promised to my employees, we promise to customers we promise to invest up to three years ago when the market was different. So I think that the payment space today is in in a stress test and in the good news that eventually it will differentiate the I call it the real value companies from the free riders companies that were riding on the payment Space. Two, three years ago when interest was low, and everybody was, you know, money was easy.
Whitney McDonald 5:06
Now you talk through the stress that’s in the macroeconomic environment today, maybe you could talk us through where technology comes in to address these pain points within payments.
Arad Levertov 5:20
So this is exactly where technology technology, but only if it’s kind of in the fundamental of the business is coming into play. Because at the end of the day, in order to both serve customers, and make profit, when you’re you know, basic costs increasing, you need to think about scale, and scale comes with technology. So, when you are able to operate with, you know, with more technology, better underwriting, smarter decisions, better go to market or you know, something that is pretty famous right now, what we call the CAC, to LTV, the customer acquisition costs, and the lifetime value of the to get from the from the from the customer, the CAC to LTV ratio. This is where technology comes into play. So you can actually operate in scale without the additional cost of you know, manual costs or travel costs or stuff like this. And this is happens in the entire world. In many, many industries. I mean, right now we’re sitting in a recording of podcasts, which was never like 2030 years ago, there was no podcast, people actually listen only to what comes to the news. Now people listen to us because they want to focus on something personalized. In the payment space. Specifically, it’s a little bit delayed because of regulations because of other stuff. But now when you get to the technology around regulation, this is where you will be able to win for the long term.
Whitney McDonald 6:56
Now, when it comes to payments, companies like Sunday, it’s not a traditional means means for payments, how do companies like sun bet, disrupt the financial services industry, if you could kind of talk us through that that would be great. Course.
Arad Levertov 7:18
So there are many people talking about FinTech over the last literally 10 years, which is great. However, still, the biggest, biggest player in the markets are the credit cards, right. And consumer credit, people use credit cards, everybody has credit card in their hand, and credit card are easy to use many people you know it is to pay, but it’s horrible experience to apply. approval rate is really low there, you know, sometimes only 50%, actually of the people get approved, people get declined. By the way, I personally got declined for credit card after moving to the US when applying at point of sale at one of the retail places. And the most important there are many, many unnecessary and hidden fees. And when you think about this, in general financial market, they focus on making a lot of money, and they less focus on the consumer. fun bit. Try to innovate for good and put the customer in the center. So for example, one of our our main mission was from day one, eliminate financial waste and pass the value to the consumers. And one of our values innovate for good. So what does it mean? We try to be better to be more personalized for the customer. So your rate should be different in my rate, right? And end it up. But both rates should be transparent. No hidden fees, no fees at all. Actually, exactly. You know how much you’re gonna pay. We want to be more inclusive than the competition because we use more under more sophisticated data, more machine learning, and we use it across the across the business to get more customer into the door. And if we do it well and these customer pay back, we can get lower rates for everybody. So use technology across the entire spectrum. How do we get to the merchant? As I said, we are adding five to 700 new merchants amongst we choose them to make sure that we do it with the right operating costs. So we add them right the sales calls, of course, how do we handle customers? How do we treat customers? And how do we run the operation in general, we use technology. However, I would say that this is not enough. Technology is amazing in the most sophisticated under artificial intelligence, and machine learning is being used across the nation across the business. However, in addition, one we put the customer in the center, which is super important, we remember that it’s all for the customer and to we never get blinded by the numbers. You know at some beat we sell have millions of customers and posts of billions of dollars of loans. But we remember that behind these numbers, there are people that at the end of the day, wanted to fix the car and go back to work, wanted to get the root canal. And you know, and get out with the pain and go back to the life. And when I’m able to, to help these customers, split the purchase, over three months over sometimes 12 months without paying any interest and still make money because they make from the merchant, I see that I’m doing the right thing. And using technology to help people, that’s the basic of what we do we never forget about it.
Whitney McDonald 10:42
Now I know they said it’s not the most important part. But technology is is a key player here for some but can we talk through the application of data and machine learning and AI to accomplish all of this?
Arad Levertov 10:56
Of course, yes, technology is the basically enabler that helps us actually get what we do, right. So when you think about some between when we think about machine learning, you know, all the big world machine learning AI data science, we from day one, and we started in in 2016, decided to put it really across their operations. So because we work with mostly physical locations, we have retail operations, which means we need to get to the stores, we need to sell to them, we need to implement our solution into their systems into their API’s into the system. And we all need to do it in a smart way because it costs money. So we build technology and data that basics, give us feedback on how does the how the how much time it takes to get the store how much data you’d like these stories better than the other stories, these vertical versus that better than the other vertical. And we get this data and get better and better and better. And then we need the stars to keep using us and working with us and working with the customer. So again, here, use underwriting use technology to get the feedback about these customers and how they do versus the store to get better and better and continue when you serve the customer, you want the end user customer to have seamless experience when they take the loan when they pay for the loan. And if they want to, you know to change some time and they have some challenges not paying the loan, give them the best experience. And we use technology look at the entire system, from A to Z with technology with underwriting with AI, and then go back with the focus on the customer.
Whitney McDonald 12:41
Now, of course, you’re in the business of innovation in payments, wondering if you could give us kind of a look ahead as to where the payments market is heading in the next year as we look into 2024.
Arad Levertov 12:56
So I think that the first thing I will try to look is look even farther, like even, you know, 20 to 2030. Because, again, I mentioned that you and I are doing right now podcast, which 20 years ago was nowhere, right. I mean, when I was a kid, we used to read newspaper like literally newspaper. When you think about the payment and you know, financial financial industry, it’s still closer to the newspaper and to the podcast that we are doing right now, which means it stuck many years ago, because customer gets the same, the same many customer get the same, the same products, and it’s all personnel is not focused on the customer. So I think that you know, 10 years from now or whatever, in the long term, it will have to change because customers deserve more, they deserve better product more personalized, and actually cheaper, right? So the companies that will be able to do it are the companies as we mentioned that, you know, focus on technology, put the customer in the in the center, and of course, make profit because if not, you’re not going to survive. So this is the long term, the next year is still going to be challenging, because the interest is high. And this is the new reality whether it’s ends or stuck, you know, easing in end of 2024 and 2025. I don’t know I treat right now this the current situation is the new normal. So it will actually, as I mentioned, be a stress test for all the companies in the space to see if you can get through this and keep growing and you know, doing it while while building profitable, profitable business. You will definitely be the winning for the long term. And you will do it if you focus on technology customers and in Detroit and this is what we try to do they have today.
Whitney McDonald 14:51
You’ve been listening to the buzz, a bank automation news podcast, please follow us on LinkedIn. And as a reminder, you can rate this podcast on your platform Choice thank you for your time and be sure to visit us at Bank automation news.com For more automation news
Transcribed by https://otter.ai
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We’ve seen a rise of innovation in financial services over the past few decades, which has brought us to the current boom of the embedded fintech market. Embedded fintech is the integration of financial services with non-financial business infrastructures, without the need to redirect customers to traditional financial institutions. The technology can be applied to everything from payment cards to insurance to create greater efficiencies for businesses.
The market for embedded finance is growing rapidly to the tune of $22 billion in total revenue. The vast majority of B2B software companies are now offering some form of embedded finance solution, signaling this next wave of fintech is here to stay and adoption will happen faster.
Embedded fintech has quickly become a core business strategy. According to Bain and Company, the total revenue of the embedded fintech market will double by 2026. Embedded finance is predicted to account for 10% of all payment transactions within the next three years, taking a significant market share away from traditional payment methods. This begs the question: What’s next for a space that’s already shown such significant growth?
Embedded lending, such as popular buy now, pay later (BNPL) services used by businesses, is showing significant growth in the embedded fintech space and gaining rapid adoption. Embedded lending enables businesses to offer customers loans directly, forgoing the need for touchpoints with high-cost financial institutions.
This is not just a moment in time; it’s the way forward because of its simplicity and efficiency. Merchants simply access embedded lending products directly from the software systems they use to run their businesses, which creates a sticky business model that scales quickly. With flexible APIs enabling seamless integrations, embedded lending can now send the future of fintech into spaces that have historically not had great access to modern financial products.
BNPL has reached near ubiquity in e-commerce, setting the groundwork for the embedded lending model to thrive in other spaces.
We will see the adoption of embedded lending by in-person service providers — think home service companies, veterinary offices and auto repair shops. In-person services have been overlooked by leading embedded lending fintechs for years, creating a whitespace.
E-commerce is no longer the mainstay of embedded lending, in large part because in-person service providers are increasingly adopting software to drive their sales experience. The tides are turning as the in-person service businesses are seeing an opportunity to grow their customer base and boost revenues quicker by offering their customers flexible loan payments embedded during the sales process.
It is impossible to predict when you will need an emergency root canal or when your car will need a costly repair, which can leave consumers in a tough spot financially. However, now, in-person service companies can embed technology directly into their operating systems that offer flexible loan options with just a few clicks, giving consumers better customer service and much needed support.
The dollar value for such transactions averages $4,000 each — exponentially more than the BNPL transactions on the e-commerce side averaging $104 each.
With larger transaction sizes, embedded lending is a win for B2B companies, SMBs and consumers. It’s rapidly becoming the golden goose of fintech and is revolutionizing the way businesses can drive revenues and customer growth.
Bobby Tzekin is co-founder and CEO of Wisetack, the leading pay over time platform for in-person services.
Bobby Tzekin
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Apple Inc. has expanded an internal test of its upcoming “buy now, pay later” service to the company’s thousands of retail employees, a sign the long-awaited feature is finally nearing a public release. The tech giant contacted retail staffers this week to offer them a test version of the service, according to Apple workers who […]
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Pensioners feeling the pinch are increasingly turning to buy-now, pay-later services, the latest sign of how the cost-of-living crisis is squeezing the UK population. Almost a fifth of over 65-year-olds said they had used the popular short-term credit offered by fintechs, according to a December survey of 2,061 adults commissioned by the Centre for Financial […]
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For long, Buy Now Pay Later or BNPL has been a popular model for making purchases with consumers using the easily available option to buy stuff ranging from appliances to gadgets to practically everything.
But now a disruption seems to be happening in the segment and a bunch of start-ups – the most common category of disruptors – are taking the BNPL model head-on by offering a Save Now Buy Later (SNBL) option.
SNBL, as the name suggests, is a combination of saving for a future purchase. The added benefit – and a very important one – is that one gets discounts – ranging from 10 per cent to as much as 20 per cent at times – on the purchase price.
SNBL is a mechanism that has brought saving and spending on the same platform and while historically there have been such schemes available in India for decades, a clutch of start-ups is now using the power of technology and data to make it available to the masses.
Start-ups like Tortoise, Hubble, and Multipl to name a few operate in the SNBL space in India and have been seeing strong traction in terms of the number of users though the overall segment is still in its infancy.
Gurgaon-based Hubble, which was launched in April 2022, currently has tie-ups with merchants like Nykaa, Myntra, Croma and Bluestone and is in the process of collaborating with 20 more brands.
Delhi-based Tortoise is another well-known start-up in the SNBL space and offers a minimum 10 per cent incentive to every user who saves to buy on the platform.
Then, there is Bengaluru-based Multipl, which also operates in the SNBL segment, but has a slightly different business model as it also allows users to invest in curated mutual fund schemes that can generate returns and lower the overall cost of the goal.
Currently, most of the merchant tie-ups are in the categories of travel, gadgets, and appliances though these start-ups in the SNBL space are actively working towards enhancing the bouquet of categories or goals – weddings as a goal has also been gaining prominence.
Also read: Buy Now, Pay Later during festive season: Is this your best option?
Here is how it works.
There is a simple registration process post which the user can choose a merchant (for instance, Apple, MakeMyTrip, Croma, Myntra, Nykaa, etc) through which he or she intends to make the purchase.
Thereafter, the goal amount and duration of deposits have to be selected and one can start from as low as ₹500 as monthly deposits. Say, for instance, one can set aside ₹5,000 every month for 10 months while targeting a purchase of ₹50,000.
Meanwhile, how the incentives are given out can differ from one platform to another. Hubble, for instance, gives a gift card for the cumulative amount – money deposited plus the incentive value – while Tortoise credits the money back to the user’s account and gives a 10 per cent cashback when the invoice is submitted.
Interestingly, if the growth numbers are anything to go by, then the SNBL platforms are indeed creating an impact.
Tortoise has signed up over 1.5 lakh customers on its app since it launched in April 2022 and aims for a gross merchandise value or GMV of $5 billion over the next four years across 4-5 verticals covering travel, electronics, and appliances, home & auto, personal care and luxury.
Hubble, on the other hand, has registered more than 4 lakh app downloads and has been witnessing its revenues jump 50 per cent on a monthly basis.
These start-ups have also seen investments from marquee names from the investing community – Sequoia Capital, Blume Ventures, IIFL Finance, Kunal Shah of Cred, and Sriharsha Majety of Swiggy among others –enter the ring.
Data from Tracxn shows that while Hubble is backed by Sequoia and Snapdeal co-founder Kunal Bahl among others, Bengaluru-based Tortoise has the backing of Vertex Ventures and Better Capital along with Cred’s Kunal Shah. Meanwhile, Multiple has been funded by names like Blume Ventures, IIFL Finance, GrowX Venture Management, and Kotak Securities among others.
Meanwhile, BNPL is inflexible in terms of the repayment schedule and components like interest cost and processing fee make it an expensive approach at times. At times, the interest cost could be as high as 15-20 per cent if the repayment schedule is disturbed.
Not to forget, that there are no real incentives in the form of cashback or savings, and in fact could lead to overspending as well since lenders are more than happy to dole out loans for discretionary spending by consumers.
But, BNPL has its share of advantages as well, especially for those who need to make a purchase instantly but are running low on cash.
Under BNPL, the borrower gets the option of an instant, short-term loan with a deferred repayment tenure, including the option for equated monthly instalments (EMIs) after the end of an interest-free period.
Also read: BNPL vs Credit Cards: What happens when you default on payment
Banks, lenders and merchants can now provide BNPL financing to business customers, in addition to consumers, through one platform.
Press Release
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Oct 24, 2022
COLUMBUS, Ohio, October 24, 2022 (Newswire.com)
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Jifiti, a leading fintech company, announced today the launch of its business-to-business (B2B) BNPL solution. Any bank, lender and merchant that caters to business customers can now offer BNPL in their own brand, embedded directly into the user journey, without a middleman.
With the addition of B2B financing, Jifiti now facilitates every Buy Now Pay Later option for leading banks, lenders and merchants globally, online and in-store, through a single platform. Merchants that would like to offer B2B-embedded financing can connect to Jifiti’s platform via e-commerce plugins, a simple API integration or use Jifiti’s zero-integration virtual card technology.
Jifiti is rolling out its B2B solution to multiple partners across international markets, including top retail brands and financial institutions. Merchants can now support their business customers easily and seamlessly, offering them more payment options that were not previously available to them. Business buyers require specialized BNPL solutions as the purchasing amounts are higher, approvals are more complex and they require different loan terms than consumers.
Jifiti’s modular platform supports every BNPL option, including split payments, installment loans, lines of credit and now B2B loans. As the platform is white-labeled, the financial institution and merchant retain full customer and data ownership and are able to build brand loyalty.
“The B2B market was the next logical step in our journey at Jifiti. We aim to give every customer the financing that best suits their needs. Now, we can help our bank and merchant partners extend that same level of customization to their business customers through specialized B2B-embedded finance,” stated Yaacov Martin, CEO and Co-Founder of Jifiti.
About Jifiti
Jifiti is a leading fintech company that powers point-of-sale financing for banks, lenders and merchants. The company’s white-labeled Buy Now Pay Later (BNPL) platform provides banks and lenders with state-of-the-art technology to easily deploy and scale their competitive consumer loan programs at any merchant’s point of sale – online, in-store and via call center.
With its multinational presence, Jifiti provides end-to-end point-of-sale financing solutions to global brands in any international market. Jifiti works with leading financial institutions including Mastercard, Citizens Bank, CaixaBank, Credit Agricole, and retailers such as IKEA, Walmart and others worldwide.
Source: Jifiti
The Affirm partnership allows GeoArm to grow its business with a leading BNPL “Buy Now, Pay Later” consumer friendly payment platform and gear it for the expanding DIY home security market.
Press Release
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updated: Aug 9, 2021
WEST PALM BEACH, Fla., August 9, 2021 (Newswire.com)
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GeoArm has entered into a partnership with Affirm to offer BNPL “Buy Now, Pay Later” directly on its website for do-it-yourself security customers to choose from during online checkout.
Shopping on GeoArm.com has got even easier with the addition of Affirm’s consumer financing options. You can now choose to pay later for your purchase over $50 in monthly installments of 3, 6 or 12 months. Finally, you can finance all of your wireless security system, smart home automation, security camera and video doorbell equipment without the expensive upfront price barriers.
Here at GeoArm, we chose Affirm to partner with because they are widely regarded as the leading BNPL consumer financial provider in the United States. With Affirm, rest assured there is only a soft credit check that won’t affect your credit score or show up on your credit report. Better yet, there are no late fees and no compounding interest!
By removing the upfront costs, GeoArm and Affirm together are disrupting the traditional home security market with flexible BNPL payments minus all the gimmicks. Just select the Affirm payment method on GeoArm’s checkout page to pay later for your favorite brand name security equipment such as; 2GIG, Alarm.com, Alula, Qolsys, Resideo and more!
Source: GeoArm