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Thought Leaders in Financial Technology: Splitit CEO Brad Paterson (Part 2)

Posted on Tuesday, Aug 11th 2020

Sramana Mitra: What do you charge the retailers for this facility?

Brad Paterson: It depends. Cash flow is king, especially today. The pricing starts from 3% for three installments. If the retailer wants to offer 6 or 12 installments, then that pricing increases. 

Sramana Mitra: You are basically factoring the retailers’ installment payments?

Brad Paterson: Yes, we have an external credit partner that does the factoring, so we leverage their funds to pass the cash in advance to the merchants. We’re essentially a technology platform. Our IP or the problems that we solve are through technology.

We like to think of ourselves as a middleman between the retailer and the payment system by turning standard transactions into installment transactions. The money movement is through a third party in most cases.

Sramana Mitra: What is the range that you are charging? 3% to 10%? 

Brad Paterson: It depends. It could be up to 9% if it’s 12 months. 

Sramana Mitra: 3% to 9%. What do you have to pay the factoring companies?

Brad Paterson: We’re a public company, so I can only disclose public information. The cost of funds is around 8% to 9%. That’s our APR. That’s what we are charged by our factoring partner. We essentially pass that on and put a markup on top of that. 

Sramana Mitra: What kind of price point do people start using your solution?

Brad Paterson: We spent a lot of time looking at product-market fit late last year. We realized that we had a great affinity with any transactions over $300. Our average order value is close to about $830. 

Sramana Mitra: Do you have indication from the market on categories that show the behavior of wanting to finance the transaction is more prevalent than others?

Brad Paterson: Yes, we do. We see a great affinity in the following industry categories – home wares (appliance, furniture, bedding). All home wares are higher ticket items. Second is outdoor and fitness – bicycles, kayaks, sporting equipment. It’s people investing for themselves or for their team or for outdoor living.

Third one is luxury retail and accessory – jewelry, clothing. Finally, health, veterinary services, dentals and visuals, tooth whitening and straightening. These are personal services with a large ticket item. Veterinary services is really popular as well. 

Sramana Mitra: What kind of adoption are you seeing? 

Brad Paterson: We’ve been in market for about two years. We’re focused in the US, but we have a presence in the UK, Canada, and Australia as well. We are available globally. We’re pretty young and relatively new to the market. We have over 900 retailers on our platform and that is growing fast. Over 300,000 shoppers have used our platform.

One of the interesting case studies is Purple. They’re one of the largest Mathis retailers in the US. They recently volunteered to show publicly that they see close to 15% of their sales through Splitit. That’s significant and that speaks to the problem we are solving and the benefits we are providing our consumers. 

This segment is part 2 in the series : Thought Leaders in Financial Technology: Splitit CEO Brad Paterson
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