Photo illustration: Axios Visuals. Photo: Courtesy of Zilch.
U.K.-based consumer lender Zilch announced this week that it is acquiring Lithuania's Fjord Bank as it tees up a broader European rollout.
Why it matters: Owning a bank will allow Zilch to offer consumer credit across the EU and lower its cost of capital.
- We spoke with Zilch CEO Philip Belamant about why he wants to own a bank, why he picked Lithuania, and how the deal changes the company's product roadmap.
(This interview has been edited for brevity and clarity.)
Axios Pro: Why buy a bank to expand into Europe?
- Belamant: "In Europe, you can only roll out a consumer credit proposition in one of a few ways: You have to apply for licensing and get approvals in every single country, one at a time.
- Or, if you own a bank, you are able to passport your consumer credit capability across all of Europe by giving notice to each of the regulators as you arrive."
How does it change your funding strategy?
- "Businesses like ours typically fund the receivables through private credit or equity, and that money comes at a cost.
- Having a bank in Europe allows us to raise consumer deposits … to fund our lending alongside our securitization vehicle.
- It would substantially decrease the cost of capital, and that's not just good for us — that's good for the consumer, too."
Why choose a bank in Lithuania, and why Fjord specifically?
- "Lithuania is really starting to become a major hub for licensing or regulatory umbrellas. The regulation is very sound, and the regulator is strong there.
- For Fjord, we needed a combination of an asset that was well-run, profitable, in consumer credit, and also had a very strong leadership team."
Will there be any changes in Fjord's operations after the deal closes?
- "They'll be a wholly owned subsidiary of the group. The management team and board we intend to keep intact. It's part of the IP as far as we're concerned.
- We will be deploying the Zilch app and technology throughout the EU, beginning in Lithuania, and then throughout Europe, together with the Fjord team."
When do you expect to move from planning to rollout?
- "For us to implement the full-fledged plan, we must wait until full regulatory approval.
- "It's difficult for us to say what that timeline looks like. We hope to see that happen at the back end of H1, H2, and then we would be at speed."
You mentioned raising deposits — will you be moving more into traditional banking?
- "The purchase is certainly not about banking in the traditional sense. We are really good at what we do, which is consumer credit and payments, so we want to really stick to that.
- Could we offer our customer the ability to hold a small balance with us, and we can pay you a yield that will beat the market substantially? That could be very interesting."
Does owning a bank change any other part of your product roadmap?
- "We will be looking to broaden the horizon of consumer credit for our consumers through this. That means we can do longer-dated personal lending.
- We can start saying, 'We'll pick for you how this should go.' Should it be an installment loan? Should it be a longer duration? Or should it be pay-in-one and get cash back or a discount?"
