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Empowered Payments with Philip Belamant of Zilch

Credit Cards were established in the 1950s and while the world has drastically changed since then, the industry has not evolved alongside it resulting in a burdensome $140B of annual interest accumulation. In this episode, we sat down with Philip Belamant, Co-founder and CEO of Zilch to look at the way advertising dollars can be used to relieve that burden on consumers and bring that number from $140B to Zilch.

Payments & Fintech Insights In This Episode

  • The genuine possibility for technology to change people’s lives for the better.
  • The impact of credit card interest accumulation on consumers.
  • How technology can drastically change lives for the good.
  • How advertising dollars can be leveraged in favor of consumers.
  • The misalignment of the “buy now pay later” model.
  • And so much more!

Featured on the Show

Episode Transcript

Heather: Hi, everyone. Welcome to “PayPod.” I’m your host, Heather Bodie, and today we’re gonna be talking about building the most empowering way to pay. Joining me is Philip Belamant, CEO and co-founder of Zilch, a company focused on becoming the best way to pay over time, anywhere, zero interest, zero hidden fees, zero surprises. Philip, welcome to the show.

Philip: Heather, thanks for having me.

Heather: So, kick us off by telling us a little bit about you. How did you get into fintech and what brought you to founding Zilch?

Philip: For me, basically, the sort of bug bit for me really in technology almost 20 years ago. And so, really, when I was in South Africa, we have a number of problems in our country, and one of those was that people didn’t have access to buy virtual goods like, let’s say, airtime or electricity or data or pay bills remotely. And so, people would travel for vast distances on weekends, be away from friends and family, queue for hours just to go and buy these things. And it seemed so strange of a problem considering most people did already have mobile devices even if they were dumb devices, not smart ones. And that was the first real challenge that I took on as an entrepreneur was to build something. How do we fix that for people and how do we get this distribution of these digital assets to people without them having to travel these vast distances? And so, effectively, what we did, in this case, is we ended up lending the airtime or electricity to the customers on the weekends so they could just stay with their friends and family, and then they would travel to work on a Monday back to somewhere a bit more urban and they could use that opportunity to repay us when it was convenient for them.

And it leveraged all of the existing infrastructure that had been built before we arrived, but completely disrupted the customer experience. That was the first real opportunity I had to really see technology changing things for the good. And you read a lot about it, on how technology can change people’s lives, it can really impact people positively, but it’s very difficult to go and really build products that genuinely do that. And this was the first example that I saw in real life where that was genuinely possible. People were reunited with families, friends, they weren’t traveling, they weren’t having to pay this surcharge in tax on basic goods, virtual goods and services. And it was such a phenomenal success. That was really where the bug bit for me. So, that’s where my start was really in fintech and payments. And then roll that forward to Zilch today. And it came about whereby I was just looking at the market, and you look at the credit market across the U.S. and the UK, and it was just fascinating to me that when you think about credit cards, they haven’t changed since they came about. And I’m sure you probably know when credit cards first started, but I was shocked to find out that it was back in the 1950s.

Heather: Mm-hmm. I believe it was. And please, keep me honest if I’m wrong, I believe a woman couldn’t hold a credit card of her own until the 1970s.

Philip: That’s 100% true. So, you look at that and you think, “How bizarre is this that you have this thing that was founded in the 1950s, it’s really not evolved much since then at all, but the whole world has changed.” And that speaks to, as you’ve just pointed out correctly as well, at people’s rights. Everything has changed in the world since then so significantly. But here we are today in 2022 and consumers are still paying $140 billion a year in fees and interest to credit card companies.

Heather: Oof. It almost takes my breath away.

Philip: Yeah, it’s just ridiculous. I mean, $1 trillion of debt we’ve accumulated on these cards. And so, I looked at that, and really the whole conversation for us was how do we fix that? And for us, fix it means how do you make that $440 billion go away? Is there a way to do it? And that’s where the genesis of the idea around Zilch began, which is how do we fundamentally use technology to take the next big step forward in this archaic way of doing things and really solve the massive problem for a lot of consumers in the world and fundamentally make their lives better. And so, that’s really where we began on this journey of ours. And so, the whole pursuit for us is how do we make $140 billion go to Zilch? And that’s where the name came. So, really, that’s what we’re all about, that’s what we’re trying to achieve here. The question is, how will we do it? And that’s the really interesting part of the journey.

Heather: So, how do you do it? How does it work? What makes Zilch so special?

Philip: So, what we really discovered is when you start to look at credit as a space, there’s two factions really that you concentrate on in the credit card space that are trying to solve the problem and are trying to solve this issue. And so, the one is credit card issues, and you get a bunch of really interesting companies like, let’s say, Upgrade or Tymit and a bunch of them. And what they’re doing is they’re making the credit card a little easier to understand for the customer because, genuinely, I don’t think any of us can really understand exactly how much we owe when we owe it, what the fees would be. It’s just very complicated. So, some of these products are doing a good job of making it a bit more easy to understand what’s going on transparently, what does it cost, when do I pay, etc. But what they’ve not really contemplated is how do they reduce the cost for customers once the customer understands what the cost is. That’s not what they’ve done. So, fundamentally, they might save customers a tax on simply misunderstanding, and that’s great, but fundamentally, the fees and interest are still borne by the customer. And so, we liked some of these approaches, but ultimately, didn’t solve the problem.

And so, we started looking at the other side of the credit equation in this regard, and there was a bunch of companies that were putting these buttons on checkout pages allowing you to pay over time for free. And the world sort of started calling these companies BNPL companies, buy now, pay letter businesses. And the thing that appealed to us about these companies was not the model because, frankly, it’s existed for decades. Layaways have been around forever, and installment payments, frankly, have also been around, particularly in emerging markets, for as long as I can remember. So, that wasn’t particularly new, but what we did like about this new model was that the retailer in fact was paying a fee per transaction, and that would allow these companies to amortize the cost of credit to the customer. Now, that was really interesting to us because we thought, “Hmm, this is a step in the right direction.” What you’re really saying is that the customer is going to pay less or nothing for the credit because the retailer is willing to amortize that cost to them by paying for it themselves. And that’s a big step towards reducing this fee, this burden of fees and interest the customer carries on credit cards. So, we really liked that, but there was a bunch of other things about this model that we didn’t like.

And without getting into it very specifically, two major problems in this space is that the competition is fierce and you have today an oversupply of lending to really a finite demand, and so basic economics has always told us that the price therefore must come down. And that’s what you’ve seen, similar to payment processing over the last two decades, I think a lot of these BNPL buttons have seen that they just have this huge erosion of revenue per transaction. I mean, that’s very visible today. And so, that puts a huge amount of pressure on the model. And then the second issue is that somewhere along the way, these companies became misaligned with the end consumer. So, they would integrate with the retailer and the retailer unsells them. But the issue in this model, we believe, is that your customer is in fact the retailer, not the end consumer. So, I’ll give you an example. What I mean by this, Heather, is that companies, for instance, would tell the retailer, “We will guarantee you that we will lend to X percentage of people on the checkout page,” because the retailer cares about conversion. The problem with that statement and that SLA that results is that it doesn’t contemplate the macroeconomic environment and it certainly doesn’t contemplate the affordability of that end consumer.

And so, what you end up having, unfortunately, is that something that I think was a good…best intentions, to begin with, loses its way. And you have companies that are earning less and less revenue per transaction. They’re under pressure to lend more and more on the checkout to customers that perhaps shouldn’t be lent to. And so, you have bad debt rising, you have revenue falling, and the model unfortunately moves upside down. The unit economics are in the negative. And so, that’s why you’ve seen a bunch of these businesses, the bigger they get, the more money they lose. So, that model didn’t really appeal to us. There’s no longevity in it. And so, what we decided to do is something a little bit in between. And really what we think we’re building on our side in Zilch is really an ad-subsidized payments network. And what does that mean? We want to take advertising dollars from brands and use that to subsidize the cost of credit or rewards to customers each and every time they pay. And the beautiful thing about this is that we can add so much more value to customers just for payment. And that’s quite phenomenal to see. Really, no one has done this before. So, we sort of think about this as the Googlelization of payment, if I could just put it this way.

So, what you saw Google do for us all in Search, you know, they created something interesting and habitual for us that we use daily, and it’s valuable to us. We all search for something, whether it’s maps or where you’re going, what you’re doing, you wanna know a saying. That’s useful. And in that usage, you’re able to have a seller meet a buyer, which could also be very useful and well-timed. If you look at social media, it’s the same, right? So, Facebook, etc., did this for us in Social, whether I’m connecting with a friend or talking or chatting or whatever. The point is, I use this habitually daily, it’s valuable to me, and on top of that, sellers can meet buyers. And that’s really quite useful. And that’s why they’ve built such phenomenal advertising businesses off the back of this because you have someone that’s really engaged at making use of the service habitually. And you can really have a seller meet the buyer that’s very well-timed. But if you think about payments, no one’s ever really done this in payment at scale. And it’s a bit odd because, in fact, advertising is all about buying intent. And actually, you could argue that payment really is at the center of commerce. You must pay. So, why has no one managed to really go and build an ad model on top of payments? And that’s really what we are doing here. That’s what we are aspiring to achieve.

So, that is the long-term goal and, ultimately, what we’re well on our way to achieving here is each and every time customers use our product to pay, whether they pay on credit or debit, they can either accumulate a huge amount of rewards, more so than what you’ve seen on any card for the last decade because interchange has all gone away in Europe and the UK and even under pressure in the U.S. And so, you don’t get the types of cashback deals you used to get anymore. Well, we can offer you two or three times those deals because we’re amortizing it with ad dollars. And at the same time, we can offer you to defer the payment for no interest of any kind, again, because brands are paying Zilch to amortize that cost to customers because this increases conversion for brands, brings them net new customers, and brings them incrementality. And so, you know, you’ve got this really interesting mix going on where effectively we’re using ad dollars to bring more and more value to customers each and every time they spend. And so, you create this virtuous flywheel effect. And that is that if customers receive more value from us when they pay, we get, of course, accumulate more customers, more buying power, brands are more interested in that base. And so, brands will pay more to access the base, which means we can give customers more value when they pay. And around and around it goes.

Heather: Brilliant.

Philip: So, that’s what we are all about and that’s what we’re trying to achieve. And we think, by the way, this will mean that, over time, we can tackle this problem. And I actually don’t just mean chip away at it. If you look at marketing budgets, they’re set to hit over $1 trillion dollars a year in the next 2 to 3 years, which means we can eradicate this problem actually 3 or 4 or 5 times over.

Heather: I wanna go back to the question you asked and ask it of you, why has no one done this yet? What roadblocks have you faced in attempting to tackle this problem in this particular way?

Philip: Well, it’s probably all the things that you would imagine. So, you know, you’re trying to combine three types of businesses all in one.

Heather: Easy.

Philip: Well, exactly. Maybe we’ll add a fourth, I don’t know, because three is a challenge. And the reason it’s a challenge is not that it’s just the case where you pull them together. How do you deliver this to a customer but make sure that you’re getting the balance of what’s required to spin this flywheel around without putting the customer off? So, if you think about Zilch today, it’s a combination of…it sits at the intersection of lending, payments, and advertising.

Heather: I love that.

Philip: So, it’s three businesses that we combine. And what’s really interesting is you have to create enough friction in the journey so that our customer engages with us each and every time they wanna pay. You have to do that well enough and balanced enough so that it doesn’t annoy customers and they go away. They want to continue using us. And you need that friction to generate, as I mentioned, the interest that can then be sold to advertisers. And of course, then you need to go and sell it to advertisers and monetize that interest and engagement, which then allows you to generate the value that you can then pass back to the customer. And if any one of these things is not done well, it throws off the entire flywheel. So, if you think about this from a user perspective, a customer needs to download Zilch and use our product. We need to make sure that each and every time they transact, we are underwriting the risk of that loan appropriately for that customer that has to be done right. We then need to make sure that that customer engages us enough so that a brand can get in front of them or give them enough or something that that customer finds useful and valuable, otherwise, all of us as customers wouldn’t care, and then make use of that revenue.

So, we need to sell that space to a brand and make use of that revenue to actually pass that back to the customer in the form of either rewards or free credits. And you’ve gotta do all of this in real-time on an ongoing basis across your entire customer base at any store in the world and for anything. And that’s not so simple. So, it’s really that, that you’ve gotta get right. And today, I’m really proud to say that we got a long way to go, but we’ve come a long way. We got to two and a half million customers faster than most fintechs, you know, we all know and celebrate today. We did this in just 18 months. We can grow by a quarter million customers a month. And people are really interested in what we’re doing. It’s resonating with them, but more importantly, it’s resonating as well with brands. And so, we feel we’ve got this flywheel turning and it’s up to us to really maintain that control. But I think it’s this that makes it so difficult for others to just simply go and throw together. It’s this fine balance that I’m speaking about that you really do need to get right. So, I hope that answers the question, to some degree.

Heather: It does, and has sparked 100 more questions. I wanna make sure I understand. So, the Zilch card has the MasterCard logo on it, but I am not in fact applying for a MasterCard when I link an existing account I have to it, correct?

Philip: Yeah. So, what we’ve done is we said people don’t need another store value, they don’t need another account. We’ve all got enough of those.

Heather: More than enough.

Philip: Exactly. So, what we really wanted to create was a way for customers to fund… So, how the product works for us is customers can either choose to pay on debits, everything at checkout, or they can pay on credit, which today is paying for…so, you pay 25% on checkout. And what we wanted to make sure is we could fund that, whichever way you’ve selected to pay, we could pull that in real-time from your bank account when you check out without you having to hold any balance with us. That’s what we wanted to achieve. So, to do that, we couldn’t go and rely on ACH or bank-to-bank transfers. It just doesn’t happen in real time and it must be user-initiated. We needed something that was system-initiated. And so, what we do is when our customer signs up, we issue them a virtual MasterCard. They can save that to Apple Pay, Google Pay, Samsung Pay, and of course, their browser.

So, in other words, they can go spend anywhere, but we needed to be able to pull the money in real-time. And so, that’s why we allow you to use your bank card, and this is important, only ever a debit card, not a credit card, that you can link to our product. A lot of these buttons in the market allow people to link credit cards to pay off credit, which seems ridiculous. We do not allow this at all. And you can link any debit card to our product. And so, what happens then is you don’t need to worry about are you storing a bit of money with us and with your bank. You don’t need to worry about that at all. You have your bank, it’s all good, you use Zilch to go and pay. And ultimately, we pull the money directly from your account as and however it is that you’ve selected. So, I wanna pay in one, I wanna pay in four, I can wake up tomorrow and change my mind, I can go backwards and reverse that. And I have all this flexibility. And that’s what we provide people.

Heather: I feel like I could talk to you about this all day and I wish you could see my face…I wish our listeners could see my face right now because I’m incredibly excited about the problem that you’re solving. I think carrying credit in massive amounts of debt with what feels like almost manipulative APR can really cripple somebody for a very, very long time in their financial health and wealth-building process. So, I think this is really amazing. Based on your vision of getting to Zilch, when do you think we can get there?

Philip: To be honest, this is something that people have asked us, but actually, almost in a negative way when we’ve seen announcements from companies like Apple looking at entering the space with a model very similar to Zilch, which we’re proud of, rather than this button model. So, interesting to see Tim Cook and the team had to look at this and decided to do it the way we do. And a lot of people said, “Ooh, but now what? What are you guys gonna do?” And our answer genuinely is we’re gonna need a lot of Apples and we are gonna need a lot of Zilches to get this thing right. So, genuinely, if we start to see more companies come in, follow our lead, take the right approach here, do good by the customer and implement it well. And I don’t think you’re gonna see tens of businesses doing this that well, but we certainly need a number more than we do have today. We can get there, and we probably could get there in the next five years, but that would require a big effort from a number of firms. So, it really just does depend how fast a few others can join the party here and help us to solve this problem for customers.

Heather: I think of all of the founders I’ve spoken to, you are the first one to say, “I’m inviting competitors. I’m inviting more people into this space to build this exact same thing alongside us.” And I’m really impressed by that. I really appreciate that notion that we’re out there genuinely to solve something that is plaguing our society financially globally. And please get on the bus, join us, and let’s make this happen. I wanna close out our time together today, and I love to do this especially when I’m talking to folks who started their own companies, asking you to share with us the best business advice you’ve ever received, and from whom.

Philip: I would say, you know, genuinely, my go-to with this is always my father. You know, he was an entrepreneur. Him and I sat together programming games, making games. Instead of people were going home and playing, I don’t know, it was Nintendo maybe at the time, you know, I was sitting with my father coding games on Turbo Pascal. And that’s really where my love for coding technology and then fintech came from. So, probably some of the best advice I’ve ever received is from him, and still continues to be on an ongoing basis. You know, I’m fortunate to have someone like him to turn to and to ask him for advice. So, I would certainly say the no-brainer answer for me is certainly my father. But as you know, that would be doing a disservice to all of the other people around the business in Zilch, advisors, and I would say specifically our team. There’s one thing certainly that you just cannot underestimate the power of a phenomenal team, which we are very fortunate to enjoy today. And I take a lot of feedback and advice from the team. So, without having a huge deal of time to prep and give you a nice quote, I would say definitely my father and then the team around me.

Heather: That does it. Phillip, thank you so much for joining us today. If folks wanna get in touch with you or they wanna learn more about Zilch, where can they find you?

Philip: They could just find me on LinkedIn. Philip Belamant on LinkedIn. Otherwise, zilch.com. And, you know, you can reach out to us through there and all of the usual social pages you would expect. So, anyone wants to reach out and chat us, that would be fantastic to hear what’s on people’s minds.

Heather: Absolutely. Thanks for joining us.

Philip: Thanks so much for having me. Really appreciate that, Heather.

Heather: If you enjoyed this episode and wanna hear more, head on over to soarpay.com/podcast to subscribe on your podcast listening platform of choice. That’s S-O-A-R-P-A-Y.com/podcast.

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Zilch

On a mission to become the best way to pay over time, anywhere. Zero interest. Zero hidden fees. Zero surprises.