Why ESG is at the core of ASX-listed e-commerce and BNPL platform Zebit

Zebit is working to restructure the financial system for millions of Americans with a poor credit score to ensure they don’t get further into debt and can improve their lives.

With a powerful story, one of the fastest growing hybrid e-commerce and BNPL platforms on the ASX, Zebit (ASX:ZBT), has a bold mission to solve a major structural problem in the United States and reduce the cycle of poverty for millions.

When it comes to Environmental, Social and Governance (ESG) criteria as a set of standards for investor consideration, Zebit ticks all the boxes.

Zebit is the only ecommerce company allowing customers to make a 25 per cent downpayment on purchases across 170,000 products and finance the remaining amount over six months.

But the point of difference in Zebit’s business model is that it’s built to serve consumers with poor or lower credit scores unable to access more traditional methods of payment financing.

Speaking to Stockhead from his base in San Diego, California, CEO Marc Schneider said Zebit’s target addressable market of more than 120 million is poorly understood and heavily stigmatised.

“What I’m saying now to investors is we don’t need to plant trees or get a seal that says we’re B Corp and socially good because the fundamental premise of this business is to do no harm, elevate the customer, give them a second chance and make a difference in their lives,” he said.

Giving customers a chance to improve credit rating

Schneider said the US had a long-term structural problem which had harmed many battling consumers and their ability to access credit.

“We have more than 47% of our adult population with an impaired or no credit score and 74% of our population who live pay cheque to pay cheque and need the ability to finance items over time,” he said.

“In the US if you don’t have a good credit score you get relegated to predatory high-cost alternatives such as rent to own, lease to own and payday loans.”

Schneider said customers pay upwards of 380% over retail price for rent or lease to own with missed payments resulting in the item being repossessed.

Annual percentage rate on payday loans can be upwards of 660% with products designed to trap customers in a cycle of debt.

“Health care costs are increasing, rents are rising along with the cost of living and so many people can’t make a difference in their lives,” he said.

“We are a mission driven ecommerce company providing credit-challenged consumers the ability to shop across 25 different product verticals and pay us back over six months with no interest, hidden fees, or penalties of any kind.”

Zebit’s secret sauce to managing risk

Since it was founded in 2015 Zebit has processed more than 1.2 million orders on their platform from tens of thousands of people other financing companies were unwilling to take a risk on.

“Our customers are incredibly sticky and if you’ve been with Zebit for more than a year your bad debt expectation is in the 9% range, but drops to 2.3% by four years,” Schneider said.

“Zebit has proven you can take a risky customer and give them a fair value proposition and they will reward you by paying on time and transform themselves into a reliable shopper and repayor.”

He said Zebit had invested heavily in developing its own credit and risk models through processing more than four million applications since its inception and pulling third party data.

“These advanced machine learning models sit at the point where we register a customer and effectively evaluate if their identity is good and their affordability and then what we do differently is have a closed market,” he said.

“Everything the customer does on our site is modelled into a set of models that sit at our own checkout because we’re the merchant and determine what the risk of that order is and which ones we can ship or not ship.

“I think we’re the only company in the world to do real time underwriting at the point of sale for a credit-challenged consumer using the intention to pay and its working.”

Zebit founded on Schneider’s own early life struggles

With a career in business and finance stretching more than 30 years Schneider never forgot his roots and is determined to make a difference in the lives of the underprivileged.

“I grew up in Arizona in a household that was heavily divided with parents who didn’t get along and ended up divorced,” he said.

“My father took everything and left my disabled mother who couldn’t work, my sister and I homeless.”

Ending up living in temporary accommodation with limited government and charity support, Schneider worked full-time since age 15 to support his mother, while also finishing high school and earning a college education.

“My mother never had a credit score because my father took care of everything, so she couldn’t get loans, couldn’t work and life was very difficult,” he said.

“I supported my mother until she passed away 13 years ago and coming out of under-grad, I joined the world bank and ever since my childhood thought about how I can make a difference so other children and families don’t face the same uncertainty I did growing up.”

Schneider said his childhood along with his career experience has all come together with Zebit to both build a strong performing company for investors but also make a difference to people’s lives.

“My experience in building expertise around how to run companies, buy companies out of bankruptcy and turn them around, with ecommerce fintech brought me to what I would call my last business at the age of 52,” he said.

“Zebit is meaningful and about giving someone a second chance by trying to stabilise their lives so they can buy what they need without getting heavily into debt.

“The reward for that is you are capturing huge lifetime value from a customer because no one in the US has ever offered them a fair deal, so we are building incredible brand loyalty.”

Zebit chooses ‘the NASDAQ of the 1990s’ for its public listing

Zebit hit the Australian bourse in October 2020, after the venture capital space in the US had turned shy of investing in credit lending companies.

“We had 10 years of economic growth and everyone here was worried about a recession, so the last thing you want to do is put money in a company that extends credit,” Schneider said.

Schneider started looking for different capital opportunities and after some research concluded the ASX represented “the NASDAQ of the 1990s”.

“You could be under $100 million of revenue, high growth and get access to no preference capital, focus on executing your business plan and have access to public markets,” he said.

“It Is clearly a growing exchange that is absolutely credible and has had a lot of successes. “

Unicorn investor Ulu Ventures a major Zebit shareholder

While many major VCs may not have been keen to invest in lending companies, Zebit has attracted the attention of impressive US based Ulu Ventures.

The VC has gained a name as a top picker of potential tech unicorns and was an early investor in SoFi and Palantir.

Ulu Ventures has increased its stake in Zebit to 8% and is now a major shareholder with CEO Miriam Rivera recently telling Stockhead she thinks the stock has enormous potential.

“Zebit serves an underserved customer base where we think that credit risk has been mispriced,” she said.

“The Zebit platform creates a vehicle for these people to purchase things they need and build a good credit score at the same time.”

Schneider said he forecasts Zebit to continue along its strong growth trajectory in coming years with further expansion planned.

“In five years, the core business should be at anything from US$750 million to US$1 billion of sales and we’ve extended Zebit to natural adjacent lines of revenue like small and medium size businesses and offered it also to people with good credit,” he said.

“I’ve worked a lot internationally and this model works in Europe, the UK, Latin America and countries like India so hopefully we will have a global footprint along with even M&A activity to join us with other companies where there’s potential synergies.”

This article was developed in collaboration with Zebit, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.