Roughly three percent of all purchases on the Internet are paid for in the world through a service called “Buy now, pay later”, which has earned its Czech name – deferred payment. In Europe it is 8-10 percent, in Sweden almost a fifth.
Several companies offer deferred payments in the country. Skip Pay allows you to pay for goods or services in up to three installments. Loyal customers of the e-shop leader Alza.cz can use a three-month “axe”. The Twisto Pay service allows you to pay with a thirty-day delay. Services also attract purchase insurance or extended warranties free of charge. For now, however, they are counting losses in the tens of millions of crowns.
The share of these services in online payments can be around two percent in the Czech Republic, estimates Richard Kotrlík, director of fintech Skip Pay. He is led to optimism by the belief that the Czechs will catch up with the West and also by the belief that they will gradually abandon the popular cash on delivery phenomenon.
Packing customers
Until recently, people knew the service as Mall Pay. Last year, Skip Pay changed its name and also its owner, which is ČSOB bank. But the company has been losing money for a long time, and this did not change even with a significant increase in sales in 2022, when the value of mediated transactions increased three times and exceeded one billion crowns for the first time. In addition to deferred payments, it also provides transfers, withdrawals and investments.
“Last year, we were still in a controlled loss, which is in line with our current strategy,” Kotrlík told SZ Byznys. He wants to reach the black numbers in a matter of years. High interest rates, which make financing Skip Pay more expensive, but also the growth of e-commerce, have an effect on how the company is doing. The share of non-payers is said to be up to one percent.
Banks and deferred payments
In addition to ČSOB and the Skip Pay service, other Czech banks also offer deferred payments. For example, Hello bank offers the HelloPay service and Raiffeisenbank is developing the PlatímPak service. Split installments can be paid at more than 4,000 e-shops through the Platba 24 service.
The director indicated that the loss was similar to the previous financial year, which ended in March 2022. At that time, the company lost 125 million crowns on a turnover of only 8 million crowns. For a business to be successful, it needs to reach a wider mass of people. The service lives on very low transaction fees, which hover around one percent.
As in the coronavirus years, we have once again become convinced that as soon as turbulence appears in e-commerce, deferred payment can usually find an answer.
The current economic situation is apparently hindering the development of this service. In order not to lose increasingly cautious customers, e-shops are trying to support purchases by offering alternative payment methods. At a time when e-commerce fell for the first time in history, namely by ten percent, the popularity of deferred payments is growing, according to Kotrlík.
“To a certain extent, it can be said that the adverse situation helped our services to stand out even more,” Kotrlík said and added. “As in the coronavirus years, we have once again become convinced that as soon as turbulence appears in e-commerce, deferred payment can usually find an answer. It was true this time as well.”
The company states that it has gained tens of thousands of new clients who can find the payment button in 13 thousand e-shops.
Czech problems from the other side of the world
Rival Twisto also boasts that it prospered last year. According to the company, the number of transactions increased by a fifth, from eight to nine million payments. Their value increased by a quarter. Deferred payment is now offered by some large e-shops, such as AboutYou, XXXLutz or Knihy Dobrovský. In Poland, the function was integrated into the e-shops of the largest Biedronka supermarket chain.
“In addition to a further increase in deferred payments, we are also observing a higher interest in Purchase in thirds without an increase, which helps people better manage higher one-off expenses in today’s difficult times,” said fintech founder and director Michal Šmída. Buying in thirds allows you to spread the payment into three installments over a quarter of a year without an increase.
However, Twisto is in trouble due to problems with its owner and is currently looking for an investor. In 2021, founder Michal Šmída sold his “child” to the Australian fintech giant Zip Co in exchange for shares worth 2.5 billion crowns, but the earthquake on the stock markets dragged the new owner’s shares to the bottom, losing 95 percent of their value in the last two years.
Zip Co is now dramatically rethinking its global plans and will exit ten of the fourteen markets where it will sell or exit assets, according to Bloomberg. This also applies to the Czech Republic. It wants to be profitable again in 2024.
At the same time, Zip had ambitions to become one of the world’s leading players in deferred payments. But that’s over. In addition, the governments in Australia and New Zealand see the potential risk of more people falling into a debt trap in this service and are preparing stricter rules, for example in the form of “scoring”, i.e. evaluating the creditworthiness of customers before the service is provided.
The e-shop king Alza.cz also has experience with deferred payments in the country. The difference is that the company is heavily capital-secured and thus took on the risks of the “axe” purchase. According to service director Petra Janovská, more and more people are using the Třetinka service. Customers who have already shopped at the e-shop and have such a clear history can pay a third of the purchase price immediately and the rest within three months. This is how they most often purchase mobile phones.
“Třetinka was created as a response to the needs of customers, and when using it, the customer does not pay any interest, it only postpones the payment period,” she said. Due to the current economic situation, according to her, defaulters are not increasing.
Other banks also offer deferred payments, for example Hello bank offers the HelloPay service and Raiffeisenbank develops the PlatímPak service. Split installments can be paid at more than 4,000 e-shops through the Platba 24 service.
