Buy now, pay later

I’m aware that Xinja plan to introduce loan products, but given the recent failure of the Latitude IPO, the historically high fees associated with credit cards and the resounding success of Afterpay, does Xinja have any plans to integrate a BNPL solution as opposed to a credit card?

The way I envision it working is instead of charging a fee to the retailer (as Afterpay does), a monthly access fee or a percentage of transaction fee could be paid by the user.

The benefit I think of integrating into the user’s account as opposed to using Afterpay would be the amount of data that Xinja would have relating to the customer’s ability to repay (historical weekly surplus, regular income & expenses, etc.), so the amount available to be used on the BNPL product could be dynamically customised to what could be afforded to be repaid.

2 Likes

Hey @Flame27 thanks for reaching out and welcome - dig the username :ninja_emojis_pink_03:

You may well have read the AFR article re Latitude https://www.afr.com/chanticleer/latitude-s-fail-is-a-debt-turning-point-20191016-p531am

Interesting question re BNPL…We will definitely not launch a credit card - whilst some people use them well to their advantage, as our CEO Eric says (#xinjamaker) credit cards are design such that the only way the bank makes money is if the customer makes a mistake.

We love the idea of ongoing transactions being used to assess a credit risk as this is a great win win; we’re also interested in personalised rates so that we use the customer’s own data (transactional history as you say) to assess the risk & deliver the personalised rate. This gives the customer a fair and often sharper rate and protects the bank, so we like this model. It would take us a while to get there - we won’t have enough data for a while - but that is exactly the sort of territory we are aiming for. Moven, the US neobank, has the notion of a pre-approved line of credit which is dynamic.

There is a fine line here however.Whilst having a pre-approved line of credit available when you need it is handy, would it encourage people to borrow? Remember the days when you’d get the random communication from the banks saying ‘your credit limit’ (on those darned credit cards often…) ‘has gone up to x’. We’re about encouraging people to do the right thing with their money, and encouraging them to save rather than spend, and in many cases borrowing might not be a good idea. As to BNPL, there is a pretty furious debate on this as well. Whilst it doesn’t have the punitive charges of credit cards, the access to instant funds might encourage sub optimal financial habits? Is it too tempting?

There’s an interesting product we came across called Sipora which describes itself as ‘before pay’ in other words, encouraging people to save for an item and buy it when they have the money, and releasing a benefit (like a discount) in so doing. We think this model could be really interesting and beneficial to the customer.

So, the exact details of our lending products next year are to be defined, but let’s keep the chat going - loved your idea re the alternative BNPL model. Particularly the dynamic payment amount to help them get rid of it quicker.

Many thanks! Cam

2 Likes

Thanks @CaptainXinja

I absolutely agree with Eric that credit cards should not be offered by Xinja since they are designed to maximise profit at the expense of the customer, which goes against the spirit of the company being customer-centric.

I also love the idea of Sipora that you mentioned, and I would definitely be keen to see integration or similar functionality with Xinja.

I also take your point on the ready access to funds perhaps being a temptation. But the limitation on Afterpay of being limited to participating vendors means that the chance of a purchase being “discretionary” is very high (with some exceptions - I noticed the other day my local dentist offers afterpay), whereas built-in functionality with a bank account would be accessible more broadly (smash repairs, expensive medication etc.) when the user has an unexpected expense. The ability be used anywhere is the lure of credit cards, despite their high costs, and even overdraft on accounts (which also have punishingly high costs).

In any case, I look forward to seeing Xinja grow with new products :smiley:

One idea that could work is tying into the P2P lending market and crossing it with the idea of, say, goFundMe. Users put out a public request for the product they want to buy, and users can lend money to each other through this. The interest rate is typical P2P in that it’s mostly moderated by narket. To speed up the process, I could say I’m willing to make 100 $5 loans between 1.4% and 1.9%, and Xinja would auto match those as needed.
Where the idea of Sipora could blend into that is that it’s tied with a “stash” in the user’s account, and they have to save a certain percentage (which Xinja calculates based off of risk, trying to build good habits, type of asset etc). If the product costs, say $300, they could be offered $150 at a high interest rate or $50 at a lower one.
I don’t think that idea is as fully sketched out as it needs to be but it seems explorable. It covers risk, gets users investing in each other, and still allows for the taking of a loan if needed…

Oh! The goFundMe part is so that I could choose that something seems worth investing in if it wasn’t auto invested

1 Like

Hi @propoke24 yes a lot of that would be sorted with a Sipora type integration…but also intrigued by your P2P blend idea…let me put it in the pot! Cam:_ninja_emojis_lblue_01: