British fintech double unicorn Zilch has expanded its securitisation facility to an additional £50 million, bringing the total to £150 million through Deutsche Bank. This includes participation from two of the world’s largest credit funds, which is a testament to the company’s lending portfolio and regulatory foundation.
The total deal will allow Zilch to support £10 billion in annual commerce and maintain its rapid growth trajectory. This expansion of the facility and an increase in its maximum size just four months after the initial securitisation announcement reflects the acceleration in the transaction and lending volumes.
Expansion plans ahead
The securitisation is a financial instrument created by pooling debt obligations and selling them to investors. It marks a development for the company as it seeks to increase its market presence in the payments sector. It will let the company scale its consumer lending operations while maintaining regulatory compliance.
Growth trajectory
Founded by Philip Belamant, Serge Belamant, and Sean O’Connor in 2018, Zilch announced its first month of operating profit while surpassing a revenue run rate of over $130 million in September. This profitability places it as a direct rival to European fintech giants such as Revolut, Starling Bank, and Monzo. All four companies also reported revenues of over $130 million within three to five years. However, Zilch almost doubled its revenues in the year to March 2024.
Currently, the company has around 300 staff in the UK and plans to grow headcount to 450 in the next 18 months.
Secured $125M debt financing
Amidst the talks about Zilch going public, the company raised $125 million in debt financing from German banking giant Deutsche Bank in July this year. Valued at $2 billion, the company announced that it will use the money to develop new products for a broader base of customers. The move is a sign of how buy now, pay later upstarts are continuing to double down on their products and loan growth.
Plans for IPO in future
As of now, the fintech unicorn aims to go public in the coming years. This deal is likely to help the company accelerate the path to IPO. Reportedly, for every $1 of debt raised, the double unicorn can generate $30 of gross merchandise value (GMV), which is the combined value of sales processed on its platform.
Credit reporting partnerships
The company operates under Financial Conduct Authority (FCA) supervision. It received the consumer credit licence through the regulator’s Sandbox Programme in 2020. This programme allows firms to test financial products in a controlled setting before full market launch.
Earlier in 2023, Zilch entered credit reporting partnerships with UK credit reference agencies, allowing customers to build credit profiles through interest-free lending. This initiative offers a credit-building alternative to traditional high-cost revolving credit products.
Instant merchant integration
Zilch operates what it terms the world’s first ad-subsidised payments network (ASPN), which combines advertising revenue with payment processing. This system provides personalised offers based on customer transaction patterns, letting retailers target consumers based on purchasing history.
This approach combines first-party data collection with payment processing, differentiating it from traditional payment providers. This approach enables direct relationships with both merchants and consumers.
Trades at the London Stock Exchange
Last year, the fintech double unicorn opened markets for trading at the London Stock Exchange to celebrate its third birthday. This announcement coincided with a series of achievements, including remarkable customer savings and growth, robust trading performance, and a string of industry awards.
Reshapes the BNPL industry
Buy now, pay later (BNPL) usage is growing fast in the UK. As per a survey by Finder, around half of UK adults (50%) have used BNPL at some point, which equates to around 26.4 million people. This number is up from an estimated 19.1 million (36%) at the start of 2023. This market is forecast to grow from £29.85 billion in 2024 to £47.27 billion by 2029, with an annual growth rate of 9.8%. It is popular among millennials and Generation Z.
Reshaping the BNPL landscape, Zilch’s model targets both online and offline transactions. It allows users to pay for a purchase in six weeks without any fees or interest. Users can earn up to 5% cashback on immediate payments, while credit options provide flexibility for larger purchases. Also, the company prioritises inclusivity, transparency, and user empowerment. With its approach, the company has a user base of over 4 million registered customers.
Competition
Recently, Affirm, a major US fintech entered the UK. Initially, the company will offer its interest-free and interest-bearing monthly payment options. In the future, it might bring further products to the market, including the physical payment card, which is available in its home market. Affirm will compete against the likes of Zilch, Klarna, Clearpay, and others that dominate the UK market.
Philip Belamant, CEO and Co-Founder of Zilch, said: “Bringing two more leading global credit funds into our securitisation structure not only underscores the increasing confidence in our business model but also provides the financial fuel and resources we need to accelerate our growth, serve increasing customer demand and continue the dramatic expansion of our wallet and market share. With our uniquely capital-efficient model meaning that every £1 of finance powers over £25 of sales, we’re in an exceptional position to deliver significant shareholder value and expand our offering, thanks to this new milestone achievement.”
Hugh Courtney, Chief Financial Officer of Zilch, said: “We are fortunate to be able to satisfy the pent-up demand for our securitisation as the business has grown at pace through the last six months. Our class-leading unit economics and unique high-engagement business model mean that this growth will accelerate as we head into 2025 and beyond. The syndication of the facility allows us to confidently drive the business forward with the headroom to grow.”
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