Playing in the big leagues.
That’s the brand-new reality for buy now, pay later (BNPL) firm Twisto following its acquisition by global Aussie BNPL company Zip.
Finalized this month, the deal for $89 million euros (about $100 million) gives the Prague-based payments startup access to Zip’s international network across 13 countries and puts it in the same league as other industry giants like Klarna, Affirm and Afterpay.
The company has now set its eyes on new markets across the European Union, beyond the Czech Republic, Poland and the United Kingdom where it currently operates.
But it won’t be a one-size fits all approach, Twisto Founder and CEO Michal Smida acknowledged in an interview with PYMNTS. The compoany will have to consider the cultural differences and tailor its solution to each market in the region.
“We say Europe, which is 27 countries, but it’s actually 27 cultures, 27 languages,” he noted. “[That’s] exciting, but it’s also a bit challenging to figure out how to win in each one of those markets.”
One benefit Twisto has, however, is its single European payment institution license, which covers all 27 EU countries and will allow the firm to scale easily across borders. The fact that the euro currency is used by most of the member states (19 out of 27) is also one less hurdle to overcome, as the company navigates challenges around language barriers and different consumer and merchant perceptions across countries in the region.
Building a strong consumer brand across Europe where Zip is less known is another key priority, he said, helping the parent company reach the same level of recognition it has in the U.S. through its Quadpay brand, and in Australia, where it’s become a category-defining company in the BNPL space.
As Smida said, the company’s focus will be on making sure it ranks highly in the minds of European consumers so that “when we mention Zip, people know what it delivers and what our values and brands are.”
Overcoming Regional Challenges
Founded in 2013, Twisto is among the leading BNPL firms in Central Europe and has served close to 1 million customers (roughly 10% of the eCommerce shopping population) and 22,000 merchants — including KFC, Burger King, Pizza Hut, Delivery Hero and Under Armour.
Even though the region is not a very active credit card market compared to the U.S., Smida said the company’s “one-click payment experience” has been successful as cash-centric European consumers increasingly embrace its simple, easy-to-use BNPL solution.
Moreover, BNPL has also alleviated a lot of the concerns that online shoppers had eight years ago when it launched, including concerns around safe delivery, which led customers to pay for their online purchases with cash on delivery.
And even though eCommerce growth in the region is still significantly lower than the growth rates of Western economies, it’s showing huge growth potential.
“Over time, the buildup of buy now, pay later has been gaining significant market share,” Smida said. “[It’s] still behind the U.S., but definitely a significant double-digit growth every year over the past eight years.”
To top it all off, the pandemic-induced digital shift in payments has given a huge boost to its business, Smida said, generating significant growth in addition to expanding its customer base with new clients who are new to the online shopping space.
One of the strongest growth areas in the past 18 months has been in fast-moving consumer goods (FMCG), particularly groceries.
“We have clients like KFC, Burger King [and] some local grocery delivery companies,” he said. “These are significant companies operating in the region, and they have [either] doubled or tripled our business.”
Today, the average active Twisto user makes approximately 15 monthly transactions, nearly double to triple what they make with their bank card, according to Smida. This trend may also be linked to the high penetration of contactless payments in the Czech market, which is second only to Australia globally, he pointed out.
“You have people just tapping their phones to pay for a newspaper, a bus ticket, for groceries or [to pay] a gas bill,” he said.
Embracing BNPL Regulation
In the U.K., the use of BNPL nearly quadrupled in 2020 to 2.7 billion pounds (about $3.6 billion) of transactions, according to official data from the Financial Conduct Authority (FCA). This has led to the country’s government to launch a consultation setting out plans for BNPL regulation for fear that it pushes shoppers to buy and take on more debt than they can afford.
Smida said having been regulated as a consumer finance company for the past six years, Twisto embraces fit for purpose regulation in every market its enters, making it a point to uphold the standard of responsible lending which is popular across Europe.
To protect users, the company complies with specific measures when it comes to determining consumers’ risk profiles like checking a public register for overdue payments or the amount of outstanding debt they have.
That information, he added, helps the firm to better understand the consumer and offer an acceptable credit limit (it can be increased over time) that would not put the individual in a difficult financial position.
The last pillar of consumer protection is “hyper transparency,” he said, making sure customers can easily and readily access information in the app on how much they owe, different payment timelines as well as an option to defer payments if necessary.
“The customer passes through several gates [of safety],” he said. “They’re getting to know us as a financial product, but also we’re getting to know the consumers and how they use the product, which allows us to then assign the proper limit [to protect them from] any trouble on the credit side.”