Zilch Continues Unprecedented Fintech Disruption, Reaching 2 Million Users in Record Time
By ExecEdge Editorial Staff
London-based fintech Zilch continues to set records for growth, signalling consumers are responding to the company’s efforts to provide what CEO Philip Belamant calls “the democratisation of free credit.” In November 2021, the company was valued at $2 billion just 14 months after its Series A, making it a double unicorn and the fastest-growing European unicorn ever. Now, Zilch has announced it has surpassed 2 million users, reaching the milestone in record time for a fintech company. While fintech is often touted as a disruption to traditional finance, Zilch is clearly standing out even within this disruptive space, and it is quickly moving toward Belamant’s goal of creating “the most ubiquitous payment product the world has ever seen.”
This rapid growth raises two central questions. First, what is Zilch doing differently from other fintech companies? Second, why are so many consumers responding to Zilch’s approach? There is no shortage of competition, investment, and user growth in the fintech space, yet Zilch’s metrics put it in a different category and understanding why this is the case sheds light on how Zilch is leading a revolution in personal finance.
What Makes Zilch Unique?
Zilch is often discussed alongside popular buy now, pay later (BNPL) companies, but the company was founded to provide more than a standard BNPL service. BNPLs allow customers to pay for purchases over time in instalment payments and traditionally focus on online shopping at partner stores. Zilch does provide that service, partnering with thousands of stores to offer Pay in 4 plans at 0% APR, but the company’s offerings extend beyond online shopping and beyond standard BNPL instalment payment plans.
These extended offerings are the key factors that differentiate Zilch’s product in a crowded space. They are based on fundamental commitments underlying Zilch’s approach: a commitment to allowing its customers to use Zilch anywhere they like to shop, and a commitment to rewarding customers with value for choosing to use Zilch.
Zilch’s commitments to flexibility and value have led to a straightforward business model that is connecting with consumers. Zilch customers use a virtual Mastercard for online or Tap and Pay shopping. They can either choose to Pay in 1 at checkout and earn cashback to use on future purchases, or they can choose to Pay in 4 and spread payments over six weeks with 0% APR.
“Never before in the history of payments have we seen so much value created for customers each and every time they transact. This is why we see Zilch resonating deeply with customers,” says Belamant.
Bringing Value Directly to the Consumer
The standard model for BNPL companies is to partner with retail stores, with retailers paying the BNPL provider each time a customer chooses a BNPL option at checkout. On this model, even though the end consumer is the recipient of the BNPL plan, it is retailers who are ultimately the BNPL company’s customer.
Zilch has built its business with a different approach which allows Zilch users to pay for anything with Zilch anywhere Mastercard is accepted. Users have access to all of Zilch’s services — including Pay in 1 with rewards and Pay in 4 plans at 0% APR.
This direct-to-consumer approach means that Zilch has the potential to grow in unique ways that distinguish it from traditional BNPL companies, which traditionally rely solely on integrating with a network of retailers to grow their businesses.
Belamant sees interesting parallels between Zilch and another company that experienced rapid growth by pursuing a direct-to-consumer approach.
“Our customer is actually the end consumer, similar to what you saw with Amazon in the early days. They built this delivery infrastructure, which was pretty phenomenal, and on top of that were delivering books,” Belamant explained in a recent interview with Bloomberg TV. “They could have taken that delivery logistics infrastructure and sold it to one bookstore, one at a time, integrated it with that bookstore and said if your customer wants to buy a book, we’ll show it to them online and ship it to them for you. But they didn’t do that. They went directly to the consumer, and that’s why they are Amazon.. Otherwise, they would’ve most likely become a logistics business, a commodity.”
In offering BNPL directly to the consumer, Zilch is following this direct-to-consumer approach and avoiding the potential commoditization of its business. Rather than rely on selling itself as a commodity for retailers to integrate with online stores, the company is focusing on growing as a stand-alone product that brings purchasing options and value directly to the individual consumer and as a direct result, creating phenomenal value for retailers, too.
A Value Flywheel
While going direct to the consumer provides unique growth opportunities, growth will only occur if the direct-to-consumer approach results in a better product, and Zilch’s rapid user growth is a clear signal that consumers are finding value in Zilch’s approach.
As Belamant puts it, Zilch’s approach is “truly about giving consumers greater value, visibility, and control over their finances. We believe it’s also why Zilch’s customer-centric product has become the highest-rated and most reviewed product of its kind on Trustpilot [a consumer-review site], with more than 37,000 reviews.”
Zilch’s features are built to offer customers a value flywheel, an approach to personal finance in which cashback rewards accumulate and facilitate purchases in a continuous value-add cycle that benefits all parties involved: the customer, Zilch, and Zilch’s partner stores. Two features have been crucial to building this flywheel: Zilch Rewards and Tap and Pay.
When customers use their Zilch card and choose to pay for their purchase in full at checkout, they earn 2% cashback in Zilch Rewards. These cashback rewards grow over time and can be applied to future purchases. At the same time, Tap and Pay enables Zilch users to save their virtual Zilch card in digital wallet apps such as Apple Pay, Google Pay, and Samsung Pay to use for in-store purchases just as they would use a traditional debit or credit card. The combination of these features creates a cycle in which Zilch users accumulate cashback rewards on more purchases, and in turn are able to use these rewards for or toward more of their purchases, either online or in-store.
Philip Belamant explained that this cashback value flywheel has been helping Zilch customers at a crucial time.
“With the recent surge in the cost of living, people need a product that works in their interest. In December 2021 alone, we provided over $5 million of value in cashback and rewards to our customers and saved in the vicinity of USD50m in interest and fees for customers in 2020, just at a time when it most counts. It’s testament to our growing international team and the unique customer-centric approach that we’ve pioneered,” he said.
In addition to providing cashback rewards, Zilch is focused on providing a means of helping customers manage their cash flow responsibly. The company utilises innovative open banking technology to perform per-transaction affordability assessments proportionally programmed to each customer, and these assessments are updated each time users spend with their Zilch card for the type of up-to-date accuracy that is not provided by traditional credit cards.
The goal is to provide customers with flexibility and value, whether they choose to use Zilch as an affordable credit option when they Pay in 4 or as a debit option that provides cashback rewards for paying in a single payment.
Zilch quickly began to accumulate users following its launch in late 2019, and that growth has only accelerated. The company reached 1 million users in just 13 months, faster than some of the fastest-growing fintech companies, including NU, Robinhood, Wise, and Afterpay. As Zilch is now adding more than 250,000 users per month, it did not take long to double this count to 2 million in just 5 months. And the company registered a record 425,000 new customers in December 2021 alone.
It’s clear Zilch is gaining more customers, but additionally, Zilch customers are paying with Zilch more often. Zilch has reported that its core customers are using their Zilch cards an average of eight times per month. At this rate, the frequency of spend among Zilch’s core customers is nearing 100 times per year – that’s more than some customers use Amazon!
Tap and Pay has been a significant contributing factor to this growth. The feature has been widely adopted, with Zilch reporting that 40% of daily sales are now processed through Tap and Pay. The takeaway is that customers are using their Zilch card much as they would use a traditional debit or credit card, and according to Zilch, this activity is saving users a total of $50 million annually in potential fees and interest that would have accrued from spending with traditional high-interest credit cards.
Investors have taken notice of Zilch’s growth. In November 2021, the company announced $110 million in funding from venture capital firms Ventura Capital and Gauss Ventures, and Zilch has received nearly $340 million in total funding to date.
Zilch is using these investments to grow the company along with its user growth. It now has over 210 employees and plans on expanding into the U.S. in 2022.
“We aren’t stopping here and are excited about our imminent U.S. debut,” said Belamant.
Zilch and the Future of Finance
There is no ignoring that fintech has disrupted the traditional finance model and that consumers are responding. Zilch is a prime example of this shift. As more consumers, particularly millennials and members of Gen Z, demand accessibility and value from their financial tools, products like Zilch only stand to continue to grow.
In addition to expanding its reach internationally, Zilch is planning to continue to improve on its accessibility and value, working to provide more possible payment options, including options such as cryptocurrency in addition to rewards and fiat currency.
As it leads the way in revolutionising finance, Zilch is committed to working with regulators. It has operated with a consumer credit licence from the U.K.’s Financial Conduct Authority since launching in 2019 and continues to build its business on being a fully regulated company as it scales up.