SAN DIEGO -- Buy now and pay later. It's an irresistible offer, especially for cash-strapped Americans living paycheck to paycheck. But that offer is usually tied to high-interest credit cards or rental stores that gouge you with inflated prices. Now, there's another option. And it may be less risky than you think.
A booming tech startup in San Diego has built a retail marketplace online that lets people buy big ticket items on payment plans -- without issuing a loan or a credit card. The startup, called Zebit, is catching fire online, earning $46 million in revenue last year, rocketing up from $21 million in 2017. That performance makes it one of the fastest-growing tech startups in San Diego, and CEO Marc Schneider said the company's trajectory points even further north. It's on track to rake in $100 million this year. For perspective: that's the annual revenue of San Diego's software star, Seismic, which just got a $1 billion valuation from venture capitalists in December.
Here's how it works
Zebit's online store is sort of like Amazon.com, but less massive. The company sells things like kitchen appliances, televisions, iPhones, tires and couches, among millions of other items. The company's customers don't have to pay full price for these items upfront. Instead, they fork over a small down payment and are set up on monthly payments that coincide with their paycheck cycle. Sounds kind of like payday loans meets Rent-a-Center, right? Not quite. There's more to it.
Zebit is not a cash lender (no money gets wired into your checking account). The company operates more like an old school creditor, issuing customers a line of store credit up to $2,500 with which they can buy products and pay for them later. The company doesn't check your credit, nor do they report to credit bureaus. And they don't charge interest. It's zero percent interest from start to finish; no fees or penalties either.
Schneider paints the company as rather altruistic, offering a fair way for "under-banked" consumers to buy the things they need -- without falling prey to predatory schemes.
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"Our target is the 80 percent of U.S. consumers who live paycheck to paycheck, who don't have affordable access to credit," Schneider said. "Those who are normally relegated to high cost predatory alternatives, taking out a payday loan at 400 percent APR or going to rent-to-own shops with limited selections."
But remember -- they're raking in millions of revenue, so obviously there's profit motive.
Wait, how does Zebit make money?
Schneider said the company's only revenue driver is the marketplace. Like a normal retailer, Zebit needs to sell its products at a high enough price to guarantee them a decent profit margin. In other words, their profit needs to be baked into the sale price.