Zilch, a buy-now-pay-later (BNPL) firm based in the UK, has made the decision to share customer data with credit rating agencies, a move that is expected to have consequences for borrowers who struggle to make payments on time. This decision comes as the BNPL industry faces potential regulation from the Financial Conduct Authority (FCA) in the UK. The introduction of new regulations, likely to be implemented later this year, may include compulsory credit checks.
Previously, Zilch utilized a “soft” credit check when evaluating customers, which did not have an impact on their credit rating. Instead, the company assessed customers’ affordability and set a borrowing limit accordingly. However, Zilch will now begin sharing data on customers’ account balances and repayment history with credit rating agencies. CEO Philip Belamant believes that this change will allow customers to improve their credit scores without resorting to costly credit cards.
Belamant explained, “Zilch has always conducted a comprehensive affordability check when customers sign up. We have now taken it a step further by formally reporting this data on customers’ credit scores. We anticipate that regulation will enter the BNPL space by the middle of the year.”
Zilch offers a payments app and card that enable consumers to make purchases in four equal instalments over a period of six weeks. The company does not charge any upfront fees for purchases made at partner stores and has a flat fee of £2.50 for purchases from other retailers.
The BNPL industry has experienced significant growth in recent years, with many consumers relying on it for their Christmas shopping and other purchases. While BNPL has provided consumers with the flexibility to buy products and pay in instalments without incurring interest, it has also faced criticism for potentially encouraging overspending. Critics argue that the absence of credit rating checks during the BNPL approval process has contributed to this issue.
Useful links:
1. Financial Conduct Authority (FCA)
2. Zilch BNPL
