With a valuation at $2 billion just 14 months after its Series A financing in September 2020, London-based payments and BNPL (buy now, pay later) provider, Zilch is officially the fastest-growing unicorn in Europe. The company is riding a new epoch wave of increasing demand for BNPL in the global payments ecosystem, which allows customers to spread the cost of a purchase over time by making instalment payments for free. Zilch is setting itself apart from competitors in the BNPL space with a unique business model that founder Philip Belamant says is “democratisingaccess to free credit, as just a single feature in their mission to  provide people the most empowering and rewarding way to pay for anything.”

How Zilch Became Europe’s Fastest-Growing Unicorn in a Crowded BNPL Industry

Zilch’s approach stands out for two reasons. First, while other BNPL companies rely entirely on partnerships with retailers, Zilch offers its customers the opportunity to use a virtual card for BNPL purchases anywhere where Mastercard is accepted.

Second, at the point of transaction, be it via Tap & Pay or anything online, Zilch customers have the option to make either Pay in 4 or Pay in 1 purchases. Customers can Pay in 4 over 6 weeks at thousands of participating stores with no fees and 0% APR*. To buy now, pay later at non-participating stores, they can use Zilch Anywhere, which allows them to pay in 4 over 6 weeks for zero interest and a nominal one-off fee. When a customer uses their Zilch card to pay for an entire purchase with one payment, they earn instant cashback of between 2-5% in  Zilch Rewards, which they can store or immediately use to discount or fund future purchases.

Customers and investors have responded overwhelmingly to this innovative approach. Zilch reached 2 million users in just 18 months and recently raised $110 million in a round of Series C financing led by Ventura Capital, bringing total Series B and C financing to over $400 million in debt and equity since launching in September 2020.

The secret to Zilch’s success in the increasingly crowded BNPL landscape may be its emphasis on convenient access. As Belamant told The Fintech Times, when it comes to finance, Zilch’s target customer base of millennials and Gen Z consumers “champion access over most other things.”

Belamant sees Zilch as solving a truly fundamental problem with access to credit. “The issue is that the people who have money have free access to it. The people who need the money, get charged the most for it. And that doesn’t really make any sense,” he said. “Why should I not have the ability as a customer today, to spread the cost of something over time and not be financially penalised for the privilege?”

It seems customers clearly agree. Zilch continues to add users at a rapid pace and is planning a U.S. launch in 2022. With a focus on providing flexible, low-cost access to credit and a direct-to-consumer approach, Zilch is positioning itself not just as a fast-growing upstart, but as a leader in the booming payments and BNPL industry that’s being accelerated by the fast growing ecommerce industry.

Zilch Anywhere

While consumers are the ultimate users of BNPL services, it’s retailers that have been the  core focus for BNPL companies. Retailers pay BNPL companies a fee every time a consumer makes a purchase using an integrated BNPL service when shopping at a retailer’s online store. These partnerships allow BNPL companies to avoid charging interest on purchases at partner stores, but they also restrict consumers’ choices of where to shop using BNPL.

Zilch set out to fundamentally change this model by offering users the optionality to use their service at any store where Mastercard is accepted, including online and in-store shopping.

This means that, unlike other BNPL providers, Zilch doesn’t need to rely on a network of online retail partners to grow its business. Helping bring even greater rewards, Zilch does partner with thousands of retailers through numerous affiliate networks to offer its customers 0% APR on BNPL purchases at partner stores. Zilch’s ubiquitous acceptance has allowed the company to circumvent incumbent network effects and continue to build its business by serving consumers directly, offering its fundamental services, including Pay in 4 and Pay in 1 plans and cashback Zilch Rewards, wherever Zilch users like to shop.

Zilch’s pervasive acceptance and Zilch Rewards are crucial to the company’s efforts to build a payment product that offers more than simply dividing payments at a selection of stores. As Belamant told UKTN, “Simple brand recognition alone or division of payments by three or four isn’t enough to inspire consumer confidence. What matters is how you make BNPL a product, rather than just an add-on feature to a bank card or app.”

With Zilch Anywhere, the company is distinguishing its product from other BNPL products by expanding purchasing options and bringing value directly to the consumer, empowering them for every purchase they day to day make.

Encouraging Responsible Spending

Zilch’s Pay in 4 plan follows the BNPL model of allowing consumers to spread payments over the course of several weeks in equal installments. In Zilch’s case, customers make four equal payments across six weeks at 0% APR at partner stores, with a one-off small transaction fee added at non-partner stores. As noted above, the stores where a fee is applicable is currently less than 1% in the UK and strictly when purchasing at those limited stores online.

Zilch has also distinguished itself from other BNPL providers with its focus on facilitating and rewarding quicker payments for those who wish to make them. The company offers Zilch users 2%-5% cashback in Zilch Rewards when they choose to pay for a purchase in full at checkout (online and in-store). These instant cashback rewards can be applied to future purchases customers make either online using the Zilch app, or in-store using their Zilch card for Tap and Pay via their Apple Pay or Samsung Pay wallet.

In addition, Zilch offers its users the ability to pay for a purchase in full at any point within the six-week period if they initially elected to make a Pay in 4 purchase.

The goal in offering these options is to provide access to credit while encouraging responsible spending. Those who wish to Pay in 4 can use the flexibility to spread payments over time, and those who chose to Pay in 1 can maximise value with cashback rewards. In either case, Zilch’s model is built to facilitate on-time payments while reducing the cost to the consumer.

“Credit card companies’ entire business model is based on lending you money you cannot pay in time so that you ‘revolve’,” said Belamant in a recent Bloomberg interview. “With BNPL it’s exactly the opposite model. We make our revenue on one occasion, when you checkout, so it’s in our absolute interest for you to pay on-time, every single time. Hence having a model that is focused on responsibility and affordability is paramount to us, and that is how the whole product is geared.”

The Future of BNPL

BNPL continues to see immense growth in both transaction volume and customer penetration. Bain & Company recently estimated 60% to 70% annual growth in BNPL transactions for 2020 and found that 25% of 18-to-74-year-olds paid with BNPL at least once in 2021.

As demand and competition increases in the BNPL space, Zilch is continuing to build on the direct-to-consumer approach that has caused customers and investors to take notice. The company has drawn on consistent sales growth, user adoption, and financing to expand from 20 to over 250 employees and establish a U.S. office in Miami.

And while regulators are no doubt taking notice of the growth of the BNPL industry as well, Zilch has taken proactive steps to grow within a BNPL regulatory framework, receiving a consumer credit licence from the UK’s Financial Conduct Authority shortly after the company was established.

“It should be regulated,” Belamant told CNBC. “At the end of the day, BNPL is a debt instrument. And that’s why we worked with the FCA from inception and got our consumer credit licence from the FCA to build regulation into our model.”

Zilch may be a debt instrument at the end of the day, but it’s an instrument that’s disrupting the future of lending and standing out in not just the BNPL space, but actually looking to redefine the global personal finance and payments market as we know it with its unique approach to facilitating responsible access to credit.

​​*Please spend responsibly. Credit is subject to status, 18+ UK residents only.T&Cs apply. Zilch No fees, 0% APR at all eligible stores. At non-eligible stores, Zilch applies a fee per transaction, 11.5% APR Representative based on a loan of £400.

iLounge author Lucy Bennett

Lucy Bennett is a Contributing Editor at iLounge. She has been writing about Apple and technology for over six years. Prior to joining iLounge, Lucy worked as a writer for several online publications.