Zebit is a popular buy now, pay later (BNPL) company with an online marketplace where users can purchase a wide variety of goods.
Zebit primarily makes money by charging a handling fee on E-certificates. These are gift cards that allow users to use their Zebit credit for making purchases in partnered stores. It also makes money from sales of consumer goods on its marketplace.
Founded in 2014 by Marc Schneider and Michael Thiemann, Zebit was created to provide users with a value-focused alternative to traditional loan firms. Zebit has always had a 0% interest rate and doesn’t charge any late fees to defaulters. The platform is targeted at Americans who live paycheck to paycheck. An estimated 61% of the US fit that description, giving Zebit a large potential market.[1]
Zebit provides credit to users with low credit scores, or even non-existent credit history. In 2019, it surpassed 300K users.[2] Currently, the company allows customers to purchase a wide range of products from its shop with a spending limit that increases based on timely repayments.
What is Zebit & How Does It Work?
Zebit is a buy now, pay later platform that operates its own eCommerce site. On Zebit, users can apply for installment-based payment plans on items. Initially, they are charged a down payment during the checkout process, which constitutes 20% to 35% of the total order value.
After that, customers pay back Zebit in installments over six months. Zebit has a strict 0% interest rate policy. It also doesn’t charge any membership or hidden fees. The company also doesn’t report a user’s payment history to major credit bureaus such as Experian, TransUnion, and Equifax.
To receive a credit limit, users must first sign up on the website or app. After that, they are given a spending limit based on their recent transaction history. Zebit doesn’t require a Fair Isaac Corporation (FICO) score check.
Instead, it does a soft credit check by pooling data on an individual’s financial transactions from various specialty credit reporting agencies. This check doesn’t affect a customer’s credit score. It allows Zebit to craft a personalized spending limit that the customer is likely to pay off within six months.
Unlike some other BNPL platforms, Zebit doesn’t actually extend a credit line. Instead, it uses a modified rent-to-own system where the spending limit decides the maximum value of items that a user can purchase. Zebit’s eCommerce store allows users to buy goods on the faith that they will pay back their installments within the allotted six-month time frame.
Zebit market, the eCommerce segment of Zebit, currently hosts over 1500 brands across 100 different categories. Here, users can purchase home appliances, game consoles, furniture, tech, and gift cards. Zebit also sells jewelry, exercise equipment, automobile accessories, grocery, and recreational tools.
To make purchases via Zebit’s delayed payment system, users must first register. The platform has a desktop website and mobile app. During registration, a user provides their email address and phone number.
Zebit sends a text message to the phone number, for verifying a user’s identity. It also requires the user to have a Social Security Number (SSN) and be over 18 years of age. Existing credit history is not a requirement, so customers with no credit score can also apply on Zebit.
In some cases, Zebit might ask for income and employment documentation for users with limited financial data. This helps the company come up with an optimized credit limit for every user. Once a user has been provided with a credit limit, they can utilize it only on the Zebit Marketplace.
This is not an actual line of credit, so no cash is transferred into the user’s bank account. Instead, it is a type of store credit that operates on a lease-based payment system. The credit limit automatically increases over time as a user makes timely repayments on their purchase.
Sometimes, an individual will be denied access to Zebit’s pay later services. This happens when the third-party financial data aggregator used by Zebit is unable to verify a user’s creditworthiness. Currently, Zebit works with SageStream and Clarity Services.
These two are specialized credit reporting agencies that provide data on an individual’s creditworthiness to buy now, pay later companies. If a user’s Zebit application fails, they will be provided an adverse action notice (AAN) from the agency that processed their data. This report can help users understand why their application failed and how to improve their creditworthiness for future attempts.
Once a user has received their credit limit, they are free to utilize it on any item within the Zebit marketplace or to get an E-certificate to make a purchase at one of Zebit’s partner stores. If users wish, they can make payments in full with a credit or debit card. This will keep their spending limit intact for future use.
However, extended periods of inactivity can freeze access to the credit system. After which, Zebit will need to run another eligibility check when the user chooses to reactivate their limit. Failing to pay off an installment by the due date can also result in a frozen spending limit or the removal of credit access altogether.
Once an order is paid for, the user regains that amount within their Zebit credit limit. Based on internal data from 2021, Zebit states that most approved customers qualify for an initial spending limit of $750 to $1500.[3] Repayment schedules are decided by how often a user gets paid.
Some users might pay monthly installments, while others pay on a bi-weekly basis. Users sign a digital agreement detailing the repayment terms when they make a purchase via credit on Zebit. Agreements can be viewed within the account management section of a user’s dashboard, alongside the order history.
Zebit’s transparent pricing model and lack of hidden charges or late fees make it preferable to many other buy now, pay later platforms. It is the platform of choice for 120 million Americans who are underserved by existing credit options.[4] Zebit also differentiates itself from other buy now, pay later companies by offering an extremely wide range of products on its eCommerce store.
Business Model of Zebit
Zebit is an eCommerce site with an in-store credit system that it allocates to individuals based on their creditworthiness. The company allows users to purchase items through installments and repay the amount over a period of six months. With credit limits ranging from $750 to $2500, Zebit allows its customers to access a wide catalogue of products.
The company doesn’t charge any membership fees or interest to users. Instead, it makes money by listing items at slightly higher prices compared to traditional eCommerce sites such as Amazon. The Zebit eCommerce platform doesn’t own its own warehouses and operates completely online.
This allows Zebit to cut down on logistical costs since the company offloads its shipping and inventory management to contractors. Customers are attracted to Zebit by its flexible buy now, pay later system. This is essentially a new version of store credit combined with a lease-to-own model.
Regular eCommerce sites require customers to pay upfront using their credit or debit card. Zebit helps customers who either don’t have a credit history or lack the credit score necessary to apply for a more robust financing solution. By offering a spending limit that requires no credit checks or prior credit history, Zebit targets the underserved segment of the market.
These are usually young adults living paycheck to paycheck or struggling with financial issues. Unlike other credit providers, Zebit doesn’t actually extend a line of credit. The user doesn’t receive cash in their bank account
Instead, Zebit merely offers users another way to buy products from its existing online store by providing a virtual spending limit or via E-certificates that they can use in partner stores. Since Zebit doesn’t provide credit, it cuts down on the liabilities associated with such businesses. And it further minimizes risks by requiring a down payment of 25 to 35% on every product purchased through credit.
When a user fails to make their payment on time, Zebit doesn’t report them to the credit bureau. It doesn’t charge late fees. Instead, the company contacts the defaulter and works out a personalized repayment plan.
Zebit’s transparent repayment structure and no-penalty recovery system help it retain users in the long term. Certain buy now, pay later services can drive away customers by charging exorbitant late fees or threatening to send collection agents. Zebit tries to disrupt the existing market by offering a more customer-centric service that adapts and grows instead of enforcing strict limits.
The company also has a proprietary algorithm that tracks customer behavior. Zebit has a massive database containing the financial histories and buying patterns of every customer on its eCommerce marketplace. It uses this data to come up with low-risk credit limits that have a high chance of being repaid on time.
Zebit is also a 100% online marketplace, which helps it avoid the overhead costs typically associate with maintaining and staffing physical locations. This helps increase the company’s profit margin. They are also able to access more markets across the nation with the help of shipping and logistics partners.
Unlike other buy now, pay later companies, Zebit targets a very specific demographic. It focuses on the 120 million credit underserved Americans who typically live paycheck to paycheck with no prospect of getting loans.[5] Since they are underbanked, these customers are often ignored by other buy now, pay later providers.
By offering a transparent, penalty-free credit service to these customers, Zebit captures a market segment that is largely untouched by its rivals. It doesn’t compete directly with other buy now, pay later services. By limiting credit usage to its own marketplace, Zebit minimizes risk and creates a tighter integration of services.
This helps reduce operating costs and results in a more consistent experience for the end user. Zebit is able to provide better customer service with quicker response times and more personalized solutions. Combining a marketplace with financing services for users with low or no credit is a unique business model.
As Zebit limits customers to purchasing items through its own marketplace, the prices are typically higher compared to big box retailers and other online stores. This limits the company’s potential for attracting a wider userbase since competing services allow users to purchase goods on third-party marketplaces using their line of credit.
However, Zebit compensates by offering a wide range of products through its store. The Zebit Marketplace contains phones, wearables, home appliances, furniture, automobile accessories, sports equipment, groceries, and more. Thus, a customer is likely to find whatever they need within a single marketplace.
Zebit’s biggest rival is Afterpay as they offer similar services. Compared to Zebit, Afterpay offers more flexibility in terms of payment schedules and has more marketplaces where it is accepted. Afterpay has a virtual card that can be combined with Google Wallet or Apply Pay to make payments in-store at various locations around the country.
Afterpay also allows users to reschedule their payments within the app, up to three times a year. However, the company has a much shorter repayment window compared to Zebit. Afterpay asks customers to pay back their borrowed amount within six weeks.
In comparison, Zebit lets users pay back the amount they borrowed over a period of six months. This results in smaller installment amounts, which makes Zebit a better choice for financially challenged customers. On top of that, Afterpay charges late fees while Zebit doesn’t.
Zebit has significant operating costs. These include hosting, research and development, staffing, and general administrative costs. In 2020, the company spent $27.2 million on operating expenses.[6]
The majority of operating expenses were due to general and administrative tasks, which accounted for $14.3 million. Provisions for uncollectible accounts constituted $9.1 million. Finally, sales and marketing took up $3.7 million.[7]
How Does Zebit Make Money?
Zebit makes money from two different revenue streams. These are the sales of E-certificates and consumer goods on the marketplace.
In 2021, Zebit earned $116.6 million in total revenue.[8] However, the company did not break this down by revenue stream. In its 2020 annual report, the company stated that it made the majority of its revenue from E-certificate sales.
Zebit made $45.2 million from E-certificates in 2020, which amounts to 51.6% of total revenue.[9] It is reasonable to assume that this trend carried forward into 2021. The company also made $42.3 million from the sales of various consumer goods on its eCommerce platform in 2020.[10]
Sales Of E-certificates
E-certificates act like vouchers or gift cards, allowing Zebit customers to spend their credit limit in partner shops. While the company doesn’t charge any interest on the credit, it charges an 18% handling fee on every electronic certificate. For example, a $200 gift card will end up costing $236 to the customer during checkout after adding the 18% fee.
In 2020, Zebit made a total of $87.6 million in revenue. Of this, $45.2 million was earned through the sales of E-certificates.[11] Customers use E-certificates as a means to use their Zebit credit limits on other stores like Macy’s, Red Robin, GameStop, Foot Locker, and Hulu.
Sales Of Consumer Goods
Zebit marks up the price of items on its eCommerce site, so they are slightly more expensive compared to typical big box retailers. Customers are usually willing to pay this extra amount for the sake of convenience, since Zebit also provides them with financing. It is unknown what the exact markup rate is, and rates can vary based on the item category.
In 2020, Zebit made $27.4 million through the sales of electronics. This category includes items like phones, home appliances, tablets, and game consoles. The company also made $14.9 million from “all other” goods, which includes sales of furniture, groceries, and automobile accessories.[12]
Zebit Funding, Valuation & Revenue
Zebit (ZBT) used to be a publicly traded company on the Australian Stock Exchange (ASX). The company launched its IPO in October of 2020 on the ASX at a price of AU$1.58 per share, for a valuation of AU$35 million.[13] It announced a voluntary delisting in February 2022 due to low liquidity.[14]
Prior to going public, Zebit raised $90.1 million over three funding rounds between 2015 and 2018. Notable investors include Route 66 Ventures, Crosslink Capital, Ulu Ventures, Wildcat Venture Partners, and Leapfrog Ventures.[15] The company’s last funding round was a debt financing round in 2018 led by Route 66 Ventures which raised $75 million.[16]
Zebit has not been profitable in recent times. In 2021, the company generated $116.6 million in total revenue. But it also had a net loss of $21 million after taxes.[17]
In 2020, the company made $87.7 million in total revenue, up 2.5% from the $85.5 million it made in 2019. However, the company’s net losses amounted to $7.4 million in 2020.[18]
| Year | Total Revenue | Net Income |
|---|---|---|
| 2019 | $85.5 million | ($12.4 million) |
| 2020 | $87.7 million | ($7.4 million) |
| 2021 | $116.6 million | ($21 million) |
Is Zebit Profitable?
Zebit is not profitable. The company has been turning a net loss for the past three fiscal years. It lost $21 million in 2021. A year in which it generated its highest-ever annual revenue at $116.6 million.[19]
The company is focused on growth and attracting more customers. It acquired 400K new registrants in 2021 and grew revenue by 33% year-over-year (YoY) compared to 2020.[20]
The buy now, pay later market is expected to reach a $3.68 trillion valuation in 2030 with a compound annual growth rate of 45%.[21] If Zebit keeps growing its brand and attracting new customers, the company is likely to be profitable in the near future.
Conclusion
As a final note, we just want to reiterate that Zebit is an excellent company with a compelling business model that’s worth keeping an eye on. We think it’s doing great things for people who need financial help.
Zebit has built its business on helping people with bad credit get access to products they need without having to pay full price up front. This means that they have a lot of repeat customers who keep coming back for more!
We hope this analysis helped you gain a deeper understanding of how Zebit makes money, and how their business model works. If you have any questions about this post or anything else related to business models, please don’t hesitate to reach out!
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