For those who eat, breathe and sleep payments and commerce, talking about various retail channels makes all the sense in the world.
But for those who aren’t payments peeps or retail groupies — those who are just regular day-to-day consumers — those channel-based distinctions are just not quite as top-of-mind.
“Customers don’t really think about channels, they think about buying stuff,” Christer Holloman, CEO & co-founder at Divido, told Karen Webster in a recent conversation, noting that in the course of interacting with even a single retailer, most consumers will actually traverse many channels as they are contemplating the big buy.
“Customers don’t really care about the online/offline distinction — they assume that whatever benefits are available to them will be available to them wherever they happen to be.”
And it was with that insight that Divido — a U.K.-based firm that makes it easier for retailers to offer financing options at the point of sale — decided to build a product in a very distinct way.
Building For Everyone (Wherever They Are)
Point of sale financing — something that was almost unheard of a few years ago — is becoming an increasingly common feature as various retailers, FinTech and technologists try to devise new ways to innovate on credit for consumers. Klarna, Affirm and granddaddy PayPal Credit (aka Bill Me Later) are all big players in the field.
But Divido is a little different in a few regards. Unlike Klarna and Affirm, which only work online, Divido is pretty much agnostic as to the location of the shopper — it works wherever they happen to be completing the transaction. It is also pushing for international scope — though currently U.K. only, the next year will see it expand throughout eight European countries.
Further, Divido is not actually a lender itself — it is a platform to connect a variety of lenders to retailers (and by extension, to consumers).
And, Holloman explained, that variety is key. It allows the retailer to approve more loans because the lenders on their platform represent a variety of risk profiles — prime, moderate and even sub-prime. The ability to offer so much transparency and choice has also been key to Divido’s rather quick rise.
Though the firm was founded about three years ago, the first year and a half was pretty much wholly dedicated to building out the platform itself. In the year-and-a-half it’s actually been out in the wild, it has gone from a firm with four clients to a firm with over 200. And those clients aren’t exactly mom-and-pop shops selling inexpensive goods — they are instead players like BMW.
“Our sweet spot is big ticket, one-off aspirational purchases with an average price of about $1000,” Holloman explained. “People will compare us with Klarna a lot, but we don’t really think we are going after Klarna at all — because our transaction values are so different, we are going after much bigger ticket items.”
And though Divido works in any channel, he did note that the online channel is where it performs best, largely because they can begin guiding the customer toward the financing option as soon as they start looking at the product page.
“By the time they come to the checkout page — they’ve been really primed to think financing, they will go with that payment option.”
But the point, Holloman says, is that the customers have a choice and have options that aren’t constrained by channel, since those kinds of constraints are conversion killers.
But that primacy of choice, he notes, pervades the entire Divido project — and for all parties.
A Better Deal
“We’re also building a better deal for retailers as well as consumers. For example, one of the most popular products our merchants want to offer is interest-free financing — where they basically subsidize the interest payments themselves on behalf of the consumer.”
It is a loss worth taking, he explained, because the boost in volume and traffic more than makes up for whatever longer term interest benefit they may have accrued.
“That subsidy charge depends on the lender the merchant is working with, though — and so by giving them choice of lenders, we are adding transparency to the process,” Holloman added.
And, because there are a variety of options for lenders on the platform, Divido can be inclusive — and extend credit to a variety of shoppers — without being worried about customers who might pay two installments and then let the others go.
“It is a common misconception that only broke people use credit to buy things,” Holloman noted. “We have a duty to make sure that people who are not suited for credit don’t get it, and if people are struggling with their bills, we don’t want to contribute to that.”
But because they do extensive checking on consumers’ credit histories — and because they “control those score cards,” they are good — and getting better everyday — at getting the product to the right person, and as such, have seen lower than average default rates.
As we noted, Divido is expanding — and expects to be fully up and running in the Nordic countries by the end of Q1.
From there — they hope to take over the world, of course. And while that is a big goal, Holloman points out that as credit, retail and customers are changing, it might just be the right time to set it.
“We work with a British retailer that already had store credit cards and credit accounts — but the type of person who is happy to do that is in decline. That is not a growth area.”
But financing at the POS is — and Divido is set on growing with it.
We’ll let you know how it goes.