Zilch, a leading buy-now-pay-later (BNPL) financier in the UK, is undergoing a significant change in its business operations. The company has recently announced its decision to share customers’ data regarding balances and repayments with credit rating agencies. This move reflects a shift towards tighter lending rules and the possibility of restrictions on borrowing if customers fail to make timely payments.

The decision made by Zilch aligns with the anticipation of regulatory measures from the UK’s Financial Conduct Authority (FCA) that are expected to be implemented later this year. These new regulations are likely to include mandatory credit checks for borrowers, which will require BNPL companies like Zilch to adopt stricter lending practices.

Previously, Zilch conducted a “soft” credit check on its customers, evaluating their creditworthiness independently and setting an affordability limit without impacting their credit rating. However, the company has now opted to share data with credit rating agencies, directly influencing customers’ credit scores.

Philip Belamant, Zilch’s CEO, believes that this change will ultimately benefit customers by helping them improve their credit scores without relying on expensive credit cards. He emphasizes that Zilch has always conducted thorough affordability checks during the signup process, and sharing data is an extension of this practice. Within the next month, Zilch’s data will officially appear on customers’ credit scores, and Belamant hopes that regulatory measures will follow soon.

Zilch’s payment app and card enable consumers to make purchases in four installments over a period of six weeks. The company does not charge upfront fees for using its app with partner stores and only imposes a £2.50 flat fee for purchases from other merchants.

The BNPL sector has experienced rapid growth in recent years, with many consumers relying on it, especially for their holiday shopping. While this payment option has offered great convenience to customers by allowing them to buy products and pay in installments with no interest, it has faced criticism for potentially encouraging overspending. Critics argue that the absence of a credit rating check during the approval process increases the likelihood of individuals spending beyond their means.

Zilch’s decision to share customer data signifies a shift towards responsible lending practices within the BNPL industry. By prioritizing transparency and accountability, the company aims to protect consumers and curb excessive borrowing. As the FCA prepares to introduce regulations, the entire sector will need to adapt to the changing landscape and ensure the financial well-being of its customers.

Useful links:
1. Financial Conduct Authority (FCA)
2. Zilch