Zilch, a Buy Now Pay Later (BNPL) provider, has collaborated with Credit Kudos, a challenger credit reference agency and Open Banking provider, to efficiently assess its customers’ affordability.

BNPL is an alternative credit form that allows consumers to divide the cost of a purchase over a certain number of installments. It has become an increasingly popular way to use credit, especially in younger people – with the UK sector growing by 39% a year. With many looking for financial products that offer them greater stability, particularly given the volatility of their income due to the pandemic, BNPL is expected to gain even more traction.

The outbreak of COVID-19 has brought affordability into sharp focus, and BNPL providers are under increased pressure to protect potential borrowers, especially young adults, and to ensure responsible lending practices through proper affordability controls while providing a seamless and fast customer experience.

The Traditional Bureau has made no provision to let lenders give enough information in assessing affordability and creditworthiness. Lenders can now access the up-to-date financial report of a borrower, using borrower-consented Open Banking data, without conducting invasive hard credit tests, ensuring rigorous affordability tests, and preventing unnecessary delays for customers.

Zilch has launched the first BNPL Mastercard that lets its customers shop at any online retailer, dividing their payments into several installments. As millions of people continue to suffer financially due to the pandemic, the organization focuses heavily on affordability to ensure that its clients can afford to repay their deferred purchases. It does so by using real-time insights driven by Credit Kudos’ Open Banking, offering a breakdown of a customer’s spending, a detailed view of their financial situation, as well as an overview of estimated and historical expenditures.

Philip Belamant, Founder and CEO of Zilch, comments: “Traditional credit checks feel a bit like driving a car whilst looking in the rearview mirror; however, thanks to Open Banking we are able to provide greater cash convenience, using rich affordability insights to ensure we are protecting vulnerable customers. Credit Kudos’ Open Banking empowered technology has been instrumental in helping us lead the charge in the sector as one of the first major BNPL players doing so, ensuring proper affordability checks and responsible lending to our customer base.”

Freddy Kelly, Co-founder and CEO at Credit Kudos, adds: “Individuals can now help lenders better understand their circumstances by securely sharing their financial information with their selected provider. Now more than ever, real-time Open Banking insights are crucial in helping lenders lend responsibly, providing fairer credit for all. Our partnership with Zilch will be an important step in ensuring the BNPL sector has the tools it needs to continue to provide flexible financial products to customers, whilst maintaining responsible lending practices.”