Late fees can be a big source of revenue for traditional lenders, and for some credit card companies, they can represent up to 20% of their annual revenue. This means that lenders who choose not to charge these penalties, such as Paris-based Alma Buy Now, Pay Later (BNPL), stand to lose a considerable amount of money each year.
But according to Louis Chatriot, co-founder and CEO of the company, aligning the interest of consumers and the profitability of the company has always been one of their main priorities: “Alma is the only BNPL company in the world that does not never charged a single euro in late fines,” he told PYMNTS in an interview.
With this zero late fee policy, lending to the right people who can repay the funds becomes crucial to minimizing the risk of lost revenue for the business, and Chatriot said this is something the French FinTech company has enough well done over the years.
“We have one of the best success rates from that perspective,” he noted. “Less than 0.01% of Alma payments end up in over-indebted people who, [compared to] the figures in the UK, for example, are very different.
Launched in 2019, the company works with more than 6,000 small and medium-sized enterprises (SMEs) in France, Italy, Spain, Germany and Belgium, offering its customers the possibility of making payments in two, three or four times or using a 10-month or 12-month plan.
“His [BNPL] a must have, as a trader you have no choice. You have to offer this option because consumers are asking for it,” said Chatriot, a former executive at online payments giant Stripe.
He said the must-have solution earns the Paris-based startup more than $1 billion in underlying sales every year, a figure that has undoubtedly caught the attention of several investors who have injected $239 million. in the company in a Series C funding round announced last month.
Read more: French start-up BNPL Alma raises $239 million in Series C
The company recently launched a mobile app to help consumers manage their Alma payments efficiently, and they will soon launch a virtual card product in the first half of this year. This card, according to Chatriot, will be integrated into the mobile application and has been designed to allow consumers to shop anywhere, both online and in-store, without being limited to specific merchants.
“His [virtual card] very similar to what credit cards offer today, but the main difference is that it is not a revolving credit, but rather a fixed loan – you know from the start how you will pay , neither more nor less”, says Chatriot. “So for European customers, I think it’s a product that makes a lot more sense than traditional credit cards.” Chatriot said.
Access to user data is essential
There has been a lot of buzz created around the impending BNPL regulations in the UK, but according to Chatriot this is nothing new in a country like France, where consumer protection rights have featured prominently for decades. .
“We have already done this for 10 years [ago], it’s just common sense,” he added. However, he said regulators need to be careful that guidelines aren’t too rigid in detailing exactly what the user experience should look like, “because then you’re basically stifling innovation and that utility is bad for consumers and traders”.
Regulators wishing to support BNPL providers like Alma who do not wish to charge late fees can ensure that they have easy access to user data, which will allow them to lend to the right profiles.
But for regulators in a region like Europe – home to the General Data Protection Regulation (GDPR), considered one of the toughest data privacy laws in the world – it may be a decision. quite difficult, in addition to the fact that countries like France do not have a credit reporting system to determine the creditworthiness of a consumer.
The solution, Chatriot said, is to require all financial players to share their customer data with other financial players and allow consumers to share their banking information with any company they choose.
“This is, by the way, taking GDPR literally – the [whole idea] behind GDPR is that customer data should not belong to banks, but should belong to consumers,” he said, adding that currently banking institutions are making it extremely difficult for consumers to share their data with third parties. companies like Alma.
Consumers are the ones who end up feeling the pinch because either they can’t access a loan if they don’t have a typical borrower profile, or they get stuck with overpriced loans because providers of the BNPL are not in a position to assess them. in an effective way.
Therefore, Chatriot reiterated the need to share data for the benefit of merchants and consumers, even committing to share their customer data with other vendors if Alma is required by law to do so.
“If we collectively share [our] data, we’re going to end up with a lot fewer situations where people are going into too much debt,” he said. “Any time you read a story about someone getting too much into debt, you can trace it back to: ‘If only the bank knew their real situation, they wouldn’t have made a loan anywhere.’
Related: French start-up BNPL Alma secures $59.4m Series B funding