A four-year-old British startup is shaking up the traditionally paper-based consumer credit market.
Divido was cofounded in London by three Swedes: Christer Holloman, who has headed up digital product projects at News Corp, the Daily Mail and Glassdoor; CTO Anders Hallsten, and CFO Fredrik Borgquist, a former derivatives trader at RBS.
Four years ago this team looked at the changing payments landscape as consumers flocked online only to be struck that the idea of paying in instalments was something of a relic from a 50-year-old industry that hadn’t yet adapted to the digital commerce age.
In the parlance of a startup founder, they spotted a "half a trillion [pound] global industry ripe for disruption," CEO Christer Holloman told Techworld.
The founders identified three initial issues: traditional lenders didn't lend across geographies; credit was still being applied for in-store using paper forms; and retailers would work with one bank to provide credit, which gives little flexibility on rates and approvals.
With a winking hint of hyperbole, Holloman says Divido has now "fixed all of that". The platform works across more than 30 banks in 10 geographies across Europe, North America and Australia. These lenders then compete on the backend so that customers get access to a range of rates and risk appetites, reducing the risk of a bad deal or a rejection.
So, how does it work?
Divido licenses software for retailers to access multiple lenders across channels, provided as-a-service. Once integrated, a 'pay in instalments' option from Divido appears for consumers at the checkout stage of the purchase funnel, with a range of options depending on the deposit amount and interest rate.
Divido pools these lenders and when a customer applies for credit online or in-store via a webform, Divido captures the details and submits it to lenders via an API to get a decision within seconds. They then do ID verification (through various third parties) within the platform and provide a facility for an e-signature. This can be done from start to finish in under a minute.
Retailers pay a setup integration fee, a monthly service fee and a cost of credit fee. However Holloman says 90 percent of its business is interest-free credit, so the "retailer picks up that bill if they have the margins to support that," he said.
The average order value on Divido is £750, so the type of retailers tend to specialise in either aspirational or distress purchases: like a bicycle or a new boiler, respectively. Other customers include home and garden, sports equipment and musical instruments. Startup mattress retailer Simba is one such customer of Divido software.
Another customer is with HTC's consumer electronics site, which has seen a 166 percent uplift in conversion from browsers to buyers in the three months since procuring Divido tech. HTC is now rolling it out across Europe.
Holloman says that providing an instalments option is becoming a "hygiene factor" for retailers. He recognises that there is more competition in the market now, with Klarna expanding beyond its native Sweden and PayPal Credit launching, but that "Klarna is great for educating the market and their proposition is different as they are a single lender and only operate in a few countries. Actually if a customers has spoken to Klarna it becomes easier to close the deal," Holloman said.
Divido is now focused on expanding geographically as it aims to "build the largest point of sale finance platform and we are delivering on that promise this year," Holloman said. Divido has raised nearly £5 million to date and has signed a term sheet for another Series A funding round this year.