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Fashion’s Ongoing Dance With Deferred Payment Credit · The Interline Podcast

• speaker-0: Hey, welcome back to the Inside Podcast. There's a golden rule of traditional journalism, which is just get out of the way and report the facts. Then there's the alternative school of new journalism, where the author of a story is more prominent and where people's subjective viewpoints work their way into what would otherwise have been pretty dry and dispassionate reporting. I didn't actually study journalism formally, despite doing it as a job now for a long time. But I know enough about the practice to put myself in that second bracket. What we write about at the end line and what we discuss on these shows is objective in the sense that we try and look at technology for fashion from every vantage point, and we try and always present things as they are rather than as we hope that they might be in the future. But it's subjective in that we, in particular me, have a pretty strong editorial viewpoint on what we want to spend our time on. Now mostly that viewpoint's informed by what we know our listeners and readers are interested in. But sometimes it's shaped by things we have personal opinions about. And the cards on the table, the reason we haven't done an episode on buy now, pay later, despite it being such a major force in fashion, is that I've always had a bit of a personal distaste for it. To put that distaste into words as succinctly as I can, for a while now I've thought payment spreading was a bit of a crutch for an industry that should be able to find sustainable growth without incentivizing people to buy things they can't afford. And I've also thought that the fintech label, as applied to the mainstays of BNPL like ClearPlay and Klana, was a fleshy veneer on some pretty run-of-the-mill unscrupulous and predatory lending. I'm putting some, but not all, of that away for today's episode for two reasons. First, the UK has just introduced new guardrails for buying our pay later lending that bring it much more in line with other lines of credit. That means affordability checks and consumer protections and so on. So now is a very good and important time to talk about this. Second, my guest today is the CEO of a company that has a different angle on deferred payments. One that aims to offer some of the benefits for merchants and consumers, but without some of the risks. His name is Alex Forsyth Thompson, and he's the CEO of Float, which is a fintech company that offers, and I quote here, card-linked installments, which we'll define as we get on, rather than net new lending. And Float is also aimed at high-value baskets and premium purchases first and foremost, rather than at spreading the cost of everyday essentials. Now, despite not being a BNPL company by the traditional definition, Alex was game for me grilling him about basically this entire space that I've avoided for the last few years. And while I wouldn't say I've come away from our conversation feeling all that differently about deferred payments in general, I will say that there's a lot more complexity to engage with here than I expected, especially if we look at the rise of buy now pay later as a bit of a commentary on fashion retail's direction overall. So let's hear what Alex had to say. Great. Alex Frosty Thompson, welcome to the Entire Podcast. speaker-1: Thanks for having me, Ben. Good to be up. speaker-0: Looking forward to this one. Now we start every one of these shows with two things. We try and build a snapshot of the guests day to day and get figure out what their ⁓ everyday work looks like. And we get people to define something that seems simple but sometimes has a bit of a sting in the tail. Let's start with the everyday. ⁓ so you run a fintech company, and correct me if you don't describe it that way, but ⁓ across two continents. South Africa. where you've been operating float since twenty twenty one and where you have more than two thousand retailer partnerships. And now the UK, where you launched, I think about a month ago, ahead of the time that we're recording this. Now I'm no banking expert, but those are presumably different markets with different regulatory environments, financial infrastructure, consumer relationships with credit and so on. Walk me through what that all looks like in practice. How much of your attention is drawn to each market. And how much like hands on product work are you still doing versus working with regulators and other bodies to get this rolling across two jurisdictions? speaker-1: Yeah, so we've been operating in South Africa, which is the we consider still the primary market. ⁓ so that's pretty established, as you mentioned, quite a broad ⁓ network of retailers. We have quite intimate relationships with various stakeholders in the industry. you know, ironed out a lot of the kinks in the product. But the reality is, and we'll get, I'm sure, into the the the meat of it ⁓ in some of your other questions, I assume, but It's it's it's built on global cardrails. So the beauty of our technology is running the product side of it is is relatively universal. And that's from two perspectives. One is, you know, the e commerce, which is the primary use case for the product. integrations are universal. You know, your Shopify's Magentos, WuCom, or, you know, cla classic API integration. A lot of the merchant communication is remote, even when we want to see them in person, ⁓ which is an interesting behavioral trait. And ⁓ then of course on the other side, the the actual processing of payments happens ⁓ always on the cardrails. And as you know, Visa, MasterCard and others ⁓ are universal, so highly scalable. ⁓ to to answer around kind of focus areas because essa is pretty established, ⁓ the kind of I mean, I don't want to say runs itself because anyone who's run a business knows that that is not the case, but is very much a going concern and quite a well-oiled machine. So most of my focus is on getting the UK jump started. We see it as the future primary market. We believe it'll overtake South Africa quite quickly. And, you know, a lot of my time is spent not so much on product anymore, but on ⁓ business development strategy, engaging with ⁓ industry stakeholders, ⁓ the regulator, and not that that's a regular thing, but those sort of level of discussions. And I I kind of hop between the two markets. I'm a dual citizen of both, which helps. ⁓ Yeah. And and it's kind of building off an existing base, same same time zone, similar cultures, language, all these things. So yeah, you'd be surprised at actually a lot of the similarities. And of course the problem statement that we're solving, which we're gonna dig into. speaker-0: Yes, and let's and let's do that now as part of the definition. So I'm gonna throw you a bit of a softball to start with. Don't worry, I think I've got some tougher questions as we go. But tell me what a card-linked instalment is. So you you mentioned card you mentioned cardrails there. So tell me what a card-linked instalment is and explain how it's distinct from what people listening to this will be thinking of if I said buy now, pay later, which is largely companies like Klarner that offer easy access to net new lending at the point of sale. and Explain at the same time if you will why that distinction matters to the different parties involved in fashion transactions. So what it means to the brand retailer, the shopper and the payment provider. What does it mean to implement and what does it take to use? speaker-1: Yeah, I think the the starting point here is talking about the problem that we're solving, which is fundamentally different. And I think on the surface, if you don't ⁓ dig into it, it looks like these things are just sort of a a ⁓ you know, kind of theater on the front end, but it's all the same. What what what Float solves for is the fact that there are many millions of consumers around the world. We call it the universal credit card problem. ⁓ It exists in South Africa, it exists in the UK, it exists very much so in the States and and pretty much wherever credit card exists. And that's the fact that ⁓ if used well, credit cards are fantastic cash flow instruments. Many people struggle to use them well. ⁓ and they've and what use them well basically means is you swipe for it and you settle that thing monthly, if not every second month max. But many people don't or can't. ⁓ so basically it's about beating the the the clock, as we say. And at the same time, many of these consumers still have headroom on the card. So there's credit available, yet because they're looking for more time, they go out and take loans elsewhere, which just shouldn't be the case. So our fundamental belief is that many of these consumers do not need more credit. They need more time. And structurally that's what our product gives them. It basically takes an existing credit card transaction, breaks it up into monthly instalments using the credit available on the card. If the credit is not available, we decline the customer. They have to have the full amount available and we make sure that's the case. A quick juxtaposition of of BNPL, the clienters, clear pays, etc. BNPL is solving a different need. It's at least at its genesis, it was all about giving a younger audience or maybe people who we had thin credit files, access to credit for things that they wanted. ⁓ and it's generally small amounts, short periods, and that's kind of how they manage their risk. And then they whack you with late fees, you know, if you don't comply. so I guess the primary similarity there is that you you're splitting into interest reinstallments, but floats always within the bounds of existing credits, never outside of it. speaker-0: So from a consumer point of view, I think it's clear there. ⁓ from a retailer or brand point of view, is is it any different to implement than it is to implement a client? speaker-1: No, the integration is pretty much the same. You know, setting up these things on your store ⁓ is very easy. ⁓ obviously depending on the complexity of your store. So that's all good. You know, there's the the normal onboarding process and KYC stuff that we do or KYB stuff we do with merchants. ⁓ but the value proposition is fundamentally different. Float is focusing on people who don't want or need new loans. So we're not trying to be another checkout lending option. People have credit cards. And what we're saying to merchants is if you give them more time the credit on the credit they already have, you know, they don't have to jump through new new hoops. They don't sign up or apply for anything. They don't have to download an app. ⁓ looks and feels like a credit card transaction, obviously with all of the ⁓ customer duty disclosures, et cetera, ⁓ i it's it's a fundamentally different proposition and really what we target is the bigger baskets. That's where the value prop for float shines brighter. So generally our AOVs are much higher than a merchant's normal AOVs because it's when someone is furnishing their home, ⁓ buying productive assets like laptops, et cetera, that it really matters. And and that's the space we fit in. speaker-0: And I want to drill bit into some of that stuff later on. But before we get too deep, let's let's understand why we're having this conversation on a fashion technology podcast. And and I can take a guess, which is clothing and accessories have been very important categories to the growth of traditional BNPL. ⁓ I think something like 40% of users who take spread payment options ⁓ through Kleiner and so on are doing it specifically for clothing, footwear, accessories. ⁓ and Kliner itself has the family behind bestseller. its second largest shareholder. So it feels like, you know, clothing and buying our pay later have gone hand in hand for a while. As you said, you're proposing a fundamentally different product. ⁓ but you must still see an opportunity to tap into that same closeness between fashion e-commerce and fintech. So tell me, what does that fashion opportunity look like for Float? How important is it to you and why? speaker-1: Yeah, the honest honest answer, Ben, is our fashion sits outside of our primary verticals. it's not far off, but where float is used the most, as I was saying a moment ago, are sort of more considered big ticket purchases, you know, your laptops and phones or ⁓ you know, furnishing your home appliances. ⁓ also things that are budget surprises. ⁓ tires, that's a huge category for us. ⁓ But fashion by nature of being in this instalment payment space is actually our fastest growing category. It's not yet on the same level, but we've got a host of ⁓ global brands on the platform. Generally it's more on the premium side of fashion, ⁓ as opposed to kind of let me say fast fashion, not that we wouldn't serve it. ⁓ so yeah, it is it is a massive opportunity for us, for sure. ⁓ I guess with the float use case, you know, someone buying a larger fashion basket definitely is is relevant and the value for the retailers, hey, I'm I'm onboarding someone who's not overlapping with a Klana or ClairePay, is going to be for my bigger baskets. Why not add it? ⁓ and that's I guess what we're starting to see happen. speaker-0: All right, fine. That makes sense. Now we're recording the show at a pretty appropriate time. So the UK's Financial Conduct Authority, the FCA, which regulates markets and financial services, has just set down some new rules for ⁓ BNPL and deferred payment credit or DPC companies in mid-July. This is gonna get confusing for me because DPC means something very different ⁓ over here on the fashion technology side, it's digital product creation. But I will ⁓ I will do my best not to mix those acronyms up. ⁓ anyway, that that ruling puts the onus on providers, so de di deferred payment providers to treat applications for these types of credit. So new net new credit, as you said, net new lending, the same way that credit card companies currently do, which is you run affordability checks and so on, you provide consumer recourse to ⁓ at least here in the UK, the financial ombudsman. And you get protection under section 75, which ⁓ puts equal responsibility on the card provider and the buyer to resolve things when transactions go awry. ⁓ the general feeling, I think, is that this was overdue and that there's been a pretty serious consumer protection gap around that like new lending BNPL for the last few years in particular. So why launch in the UK now? ⁓ so you're you're a CFA charter holder, you're CFP qualified, so you know you know the landscape, you know what's happening with regulations. Do you think you can get ahead of the game with a ready answer for the FCA that those like Klana and Clipper can't? Or do you think Float's model is just simply fundamentally different enough that you're kind of outside or adjacent to the scope of those new rules? speaker-1: Yeah, so I think there's kind of two questions there, Ben. One is why the UK, second is how would we or how are we approaching, you know, regulation with our product. UK for us is, we believe, fundamentally the best fintech market in the world. It's an it's an acid test for us as a platform with global ambitions. ⁓ and and ⁓ part of that is they've got strong but progressive regulations. So Our experience, ⁓ you know, we entered the UK just as a side note via the the Global Entrepreneur Program through the Department for Business and Trade. So that opened a lot of doors for us to have kind of front-footed engagements with ⁓ the regulator and, you know, other industry bodies, which has been great and really formed part of our decision to enter the UK. Now on the the BNPL regulation, ⁓ DPC officially, ⁓ What they're targeting is new third party lending at checkout. Right. And I agree with you it was long overdue, but I guess when innovation happens, it often front runs regulation and then they catch up. ⁓ but definitely a positive step. And I think primarily what they're trying to do is put guardrails in place, not stifle players, but just to make sure that it doesn't fall foul of, you know, ⁓ treating consumers badly. But anyway, Floats Float's model ⁓ is not third party lending at checkout. We are an instalment technology that allows merchants to open up their own Cardlinked instalment offering to their shoppers. And it's within the bounds of existing credit card let's say, regulations and and structures. So it's a very interesting, different model. You know, we did did engage the regulator before we'd even gone live and understand kind of where we fit. And it's far more of a technology play ⁓ than I'd say a lending play. And we will probably get into the meat of the regulations and when we sit between all of it. But ⁓ fundamentally, you as long as we're playing within the bounds of that credit card and you know, an an instrument, an infrastructure that has been widely used for a long, long time. It's very well understood and you know that that has given us structurally some regulatory benefits, let me say, that aren't there with new forms of lending that sit off those rails. speaker-0: Okay, good answer. So and it that brings us, I think, to a little bit more detail on the credit card ecosystem in general. Now, earlier on you called them one of the best cash flow tools available, ⁓ when they're responsibly and correctly used, which, you know, I agree. I've I've given people the same advice, I'm sure everybody has, ⁓ which is spend spend as much as possible on it every month to improve your ⁓ credit profile, pay it all down at the end of the month. Fantastic. ⁓ as you mentioned though, the the time there. is a primary issue. Right. ⁓ 'cause I did a little bit of background and the average UK adult apparently carries something close to one thousand five hundred pounds in credit card debt. That y again, if you if you need more time to pay it off, the only way to do that is to shuffle it between 0% interest cards if you don't want to become part of the twenty billion pounds in credit card interest that consumers are forecast to pay this year. Tied to that though is this idea that credit cards can be very powerful for consumers, but they're also immensely profitable for banks and lenders. They're not just consumer tools. ⁓ you know, the the typical APR for a credit card, I think, in the UK and the US is somewhere between 24 and 25%. there's a couple of stats I want to stack side by side with that. One is that the API in credit cards in South Africa is apparently quite different. It's more between 10% and 21%. And the APR for Klana is below twenty two percent. I think it's about twenty-one point nine. give me some more insight into how the time portion of this allows people to use credit cards responsibly. Because if you look at it on the pure interest basis, if I make a purchase and I'm high paying interest on it, just from that pure vantage point, I'd be better using a B NPL provider ⁓ than I would be using a credit card. So walk me through how how you see this as a consumer tool. speaker-1: Yeah, that it's ⁓ this is an interesting one and and I think it's gonna be very helpful to dig straight in. So think about what happens in a normal credit card transaction. Let's let's say, you know, something meaningful that someone might struggle to settle. So ⁓ for for round numbers, let's say eight hundred pounds. Right. So a normal credit card transaction someone swipes. That's either, you know, with a zero balance or on top of a rolling balance. ⁓ ⁓ th thirty percent of UK consumers sit with a rolling balance. So let's just use that example. So they now have to settle 800 pounds on the card within that window. Otherwise, as you said, interest is gonna mount up. But many can't or just don't because they're not maybe behaviorally trained that way. ⁓ what Float is doing is one, making sure that 800 pounds is available on the card. If it's not the user is declined. if it is, they're approved. The full amount is authorized on the card, meaning that, you know, that that credit is effectively blocked off for use ⁓ and until it's paid off. And we simply are billing the card in monthly instalments. So let's say four instalments for ease of reference, you are paying 200 pounds today, build off your card, 200 pounds in a month, and so on until it's paid off. Now for the consumer, All they have to do is settle the instalment amount on the card. ⁓ if they never settle their instalment amounts, yes, ⁓ interest will rack up, but it is always less than had they swiped with their card in the first place, ⁓ when they use flows. And I think an important thing to talk about in our economics, as we call it, our revenue model, we don't we we make a fixed fee from the merchant. That's our primary revenue driver. We have no late fees, we have no interest, so Our technology is not incentivized to you know, for people to take longer paying off. As soon as you have an APR-driven revenue model, your incentives totally change. So I I think that fundamental difference is important. ⁓ and just maybe I'll pause there, Ben. You might have a follow-on question, but I want to unpack some more of the structural differences there. speaker-0: Yeah, so my only my only follow-up question would be so you you you mentioned the flat fee for the merchant there and that being so what does it mean for you to grow then on that basis? To scale just literally come from you onboarding more merchants, more retailers over time? ⁓ because there isn't, as you said, there isn't that incentive to get hook people into long-term lending. That that that's not where additional revenue comes from. There's no late fees and so on. ⁓ so y the path to growth to you presumably is embedding and integrating into more retailers and those retailers then subsequently being able to drive either higher basket values or being able to attract new consumers by dint of having this as an option. speaker-1: Yeah, exactly. And and the beauty of the product, as I said to you, is it's it's globally scalable. It's ⁓ these are global credit card rails. Yes, I think they're gonna be regulatory nuances in markets, not just an open playing field, but but as I I will kind of elaborate on it in a bit more detail, structurally it solves a lot of the concerns regulators have. But exactly that, it's building a global network. We have some amazing global brands that I guess use South Africa as kind of a proof point and have said, listen, this will be super beneficial and complementary to my checkout in this other market. And that's been kind of an a useful follow on strategy for us. And one other interesting element, Ben, is and this is more often the question we get. It's not like, is are is what you're doing good for the consumer. It's more like how do banks feel about this, right? Because they want to earn that interest, but now they're earning less of it. And the interesting answer there is we're the only, as far as I know, alt payment method, you know, this Card LinkedIn Solman model ⁓ is the only alt payment ⁓ method that drives all volume to the credit card. ⁓ almost every other pr player is trying to run away from the credit card because of interchange and cost of processing. ⁓ so that's a very interesting dynamic. And I I guess there is no perfect model and I think we'd be disingenuous to say it is, but I think it ticks a lot of the boxes on all sides ⁓ of of the table. ⁓ and just final thing I want to add, you know, one of the the the big ⁓ bugbears that the regulators have mentioned around things like BNPL, which I do think is a fantastic product, just by the way, ⁓ it just obviously needs guardrails, is is the risk of stacking, right? People borrowing from four different lenders in a week, no one has visibility of it, and it's it's debt people can't repay. you know, with with our products, it's just structurally designed to prevent that. The whole amount has to be available. credit card payments pull into the bureaus automatically, and you know, there's no escalating fee harm because we just we don't stack on late fees for missed payments, et cetera. It's just fundamentally different. speaker-0: That's a really good answer. ⁓ now we just talked about growth for for you ⁓ and what and the how that relates to onboarding your retailers, how it relates to your relationship with the banks and so on. thinking back to a survey we did last year, ⁓ we asked fashion professionals across every job role and market what their biggest priorities were. And pretty people were pretty aligned on As you would probably expect, profitability, margin, growth, and protection, ⁓ and expansion opportunities into new categories. So growth is a big lever here. All right. and that sounds really relevant to you, because ⁓ you know, your yours is a model that is designed for bigger baskets, as you said, like 130% larger, I think, by your metric. I I've struggled to reconcile some of the and I'm not gonna hold you accountable for the whole economy here, but I struggle to reconcile the idea that brands have to find growth by encouraging people to buy things they definitionally can't afford, ⁓ or that they need that they need to spread out. ⁓ you only need to look at the move to the leasing model for iPhones to get ⁓ some indication of the fact that premium goods Have a dwindling affordability to them. And that they are now things that people need to spread more, even more than they have done with previous like carrier subsidies and things in the past to be able to afford. Tell me, give me some insight into why you think this sort of there why there is a deferred credit. There's a the pathway for deferred credit to pursue growth that's not just encouraging shoppers to raise their own risk profile so that the brand or the retailer can achieve their own growth ambitions. That's the part I struggle with a little bit here. And it's it's it's philosophical and ethical as much as it is technical, I think. speaker-1: Yeah, and ⁓ listen, it is I'm gonna try and narrow it down and simplify it, certainly from our perspective, but it is a complex question. It's an existential question in terms of just economics and consumerism, right? Like should people ever be buying things they can't afford? The reality is ⁓ credit is a fundamental part of any economy. ⁓ drives social mobility, drives cash flow. ⁓ problem is when you y And I'll go back to it, look at the incentives and I'll show you the outcome. ⁓ I'll show you the behavior. So you gotta look how people earn their money to understand where not the whole model will end up, but where certainly certain players will end up without guardrails. And I think that's what's most important. ⁓ in an altruistic world, you never you would never need credit. Everyone would have money and affordability would be perfect, but we we know that's not the case. ⁓ so I think it's around what models ⁓ are adding value and are responsible. I think to give BNPL some credits, again we are, we are credits the excuse the pun, and again we are fundamentally different. The the structural intent there was to offer at least good payers, you know, interest free period to pay off. Whereas traditional credit, you know, your old school store accounts and point of sale loans, whatever, personal loans, you're you're incentivized, you make money when people are in debt. And often the good payers are subsidizing the bad payers. That's how lending works. So high interest rates all around and you know you you subsidize your losses by those you actually pay. you know, most of these interest free models make their primary source of revenue is from the merchant. Yes, I think some players maybe are earning more than they should on late fees. but I still think it's this instalment offering is fundamentally better. ⁓ and it's inevitable. ⁓ we'll talk maybe to how I see the future panning out. I think that could be an interesting discussion on this call. But yeah. So I th I think in summary for us, you know, where the problem comes in is the incentives, ⁓ how people are making the money and again, net new credits. ⁓ just not a space that where our DNA is, certainly not right now, and I can't see in the near term being the case. We're focused on existing borrowing capacity. ⁓ you know, that someone's issuer who has sight of their income and expenses has made the decision to offer. And if that's not available, we simply won't offer it. speaker-0: Then I think I'm gonna give ⁓ a bit of runway to to the opposite viewpoint here. So I to be clear, like you s you said BMPL, ⁓ interesting, good model and so on, ⁓ not not one you're engaging in. And I I also wanna be clear that I don't think all lending is done by like Dickensian money lenders ⁓ squeezing squeezing the poor for every ⁓ penny that they have. ⁓ so you know, you mentioned you're especially active in consumer electronics like productive devices, furniture and so on, and the premium and of fashion. ⁓ And that your you see better results when float is deployed at merchants with higher basket values. That's that's the interesting part of this to me. And I think a lot of people have compartmentalized the idea of deferred payments as being a way for people to just spend Bread essentials, ⁓ and that it's that symptom of what I just talked about, like a societal ill where people can't afford the things that they need desperately. There's the other end of this, which is these are discretionary high-value premium purchases that presumably people who theoretically at least can afford them, ⁓ are are going after. Tell me who those shoppers are then. So tell me, tell me who is is is is behind these kind of high-value baskets with the deferred payment side of things. And The reason I'm asking this, I think, is that your typical like you you said, you know, you're not going after fast fashion, but the mass market fashion is is pushing upwards at the minute. There's a conscious strategy of like premiumization, which is not not a word I love, but that's it's the opera one, where where companies are trying to pursue higher price points, they're trying to go after higher value consumers and so on. Cause I feel like that makes a good case for your model here. speaker-1: Yeah, so our our target shopper in a nutshell is a credit card holder with a news limit. And and if you know and also generally digitally native, right, which of course there's a large audience of in the UK. But when you know those sort of three factors down, you've got a higher income audience, generally speaking, with more established credit and often quite deliberate purchases. These are not people that have never had credit before for the most part. These are people that ⁓ have earned the right to have a credit card and if they have amounts available, then generally they're managing it to some degree. Right. And I think what we're trying to solve for is, you know, people have headroom on the card and to your point, they're either taking up a whole new card just to buy themselves time, which, you know, that's got massive risks to it. ⁓ or they're going and taking out a BNPL loan when they have this massive headroom available. yeah, the the the push upward into fashion, I guess the fact that we're starting to see growth in our platform might talk to that point of yours. ⁓ it's ⁓ I can tell you even the uptake at fashion retailers is solid and I guess that's why we've retained all the ones that we have and the basket uplift is is good. ⁓ But again, the the things that people use float for, and it's a vast majority of our volumes, are are laptops for themselves or even for their businesses, ⁓ sports and hobby equipment. I guess that is a bit more of a want than it need, but it's not throwaway money, ⁓ furnishing their homes and that sort of thing. So it just generally is a more considered purchase that people are making. ⁓ that's not to say it can't be used for things that aren't, you know, just felt needs. But that is kind of at the heart of what we do. speaker-0: No, I want to ask you something I asked the chairman of a legal firm about recently. And it's something that's been buzzing around in my head for probably a year or so now. Now, we're currently seeing you know, you mentioned integrating ⁓ float, but also Clown or all these other things. Like they these are these are options that are available for merchants to integrate into the checkout process. We're starting to see the first serious integrations of conversational AI into this process as well. ⁓ so that means text and voice agents that are Tuned for engagement and like hyping people up and personalization. ⁓ if you combine that with deferred payment, all of a sudden, my concern is that you have a very low friction on ramp for people buying things. ⁓ I I think Klana has a Chat GPT plugin. So for instance, sorry, this is not not theoretical. So my concern is that you we all know that people spend more when instalment options are put in front of them. We all know that. LLMs interacting with ChatGPT, Claude, Gemini, and so on can be very persuasive. I feel like we're going to see in the fairly near term cases of AI agents talking people into purchases that those people are then still paying off 18 to 24 months later. And I feel like that's a looming regulatory issue. What's your take on that? What what what's your take on the role that you expect AI to play in the path to purchase? speaker-1: Yeah, I I agree with your concerns. I think ⁓ look, AI is ⁓ I'm I'm geeking out over AI at the moment. Just like for my own productivity on a daily basis, it's just been fantastic. ⁓ but yeah, I mean I've let's let's get away from commerce for a second. I've had ⁓ you know, it talking me into things that just actually if you step back and look at it, do not make total sense. And I think when you then overlay that in the management or use of people's money without correct guardrails that is ⁓ d a concern for everyone. And for me, the getting to the heart of what you were alluding to, like that all comes down to consumer duty and proper disclosures and explanations of what people are getting into. And ultimately an agent is representing the provider that's behind it. Right. So let's assume that People are doing affordability checks, those aren't being gamed, and that, you know, regulation is being kind of adhered to for the most part. where I see the risk here is not fully disclosing what someone is getting into for making the purchase. So ⁓ they might have had a cold at a cold look at it, ticked all the boxes for affordability, but not really understood what they've got themselves into. So Where I think regulation probably would come into play is not trying to stifle innovation and slow down agent e commerce, but saying to providers, listen, any agent that you have representing you pointing towards your product, you are liable ⁓ for what they say, how they explain it. And you need to evidence that what that consumer's been shown ⁓ aligns with best practice consumer duty and disclosures, et cetera. And I think that's probably the most common sense way. ⁓ the industry could look at it. speaker-0: That's a really good answer. And and that that does satisfy me. I think it's something that's been bothering me. I'm glad you see it as a potential looming issue as well, and that you've given some thought to the ⁓ the redress for it. I'm gonna close with a question that you can slice however you want. ⁓ so I think it's clear from some of the questions I've been asking that I I see this like growth, as I mentioned, like growth coming from lending or growth coming from credit as being a bit precarious for an industry that is Pursuing growth at all costs and using kind of deferred payments as a bit of a prop to to get there. But as you said earlier, as long as we've had money, we've had borrowing and lending, and the desire to spend now and pay later is pretty universal. So if we think over the next three to five years about the two parties to that exchange, the buyers and the sellers, what do you think it looks like for technology to have made a positive difference for both of them? speaker-1: Yeah, I mean, this is real crystal ball stuff, but I the way that we see it panning out, and I think there's there isn't just not going to be one winner-takes all, one model. instalment payments is an inevitability. and I think to give BNPL some credit, it's kind of ignited that fire, you know, outside of markets that have always traditionally offered instalments like Brazil and Mexico. I don't know if you've ever looked into Latin America. ⁓ and w we just see instalments becoming a native feature, particularly on on cards day to day. You know, this is something that's gonna be baked into financial infrastructure, more predictable repayments. And interestingly, just not having the consumer as the sole funder of that. You're seeing interesting buy now pay later models that are funding that cost via advertisements. You're seeing obviously the the traditional models funded by by merchants. ⁓ it's not to say the consumer won't or or shouldn't ever be charged, but I think it really opens up some door for the doors for some some interesting innovations there. and, you know, finding different ways to finance purchases. But again, at the heart of it, ⁓ I think it's been a common thread with all your questions today is how do you have the guardrails in place to make sure that that whole ⁓ Perfect sounding free money kind of scenario doesn't get away from from people, you know, that consumers are you're not having some systemic risk here because there's all of this free money. So naturally with these innovative models, you're gonna start seeing regulation pop up. ⁓ and I think the what the the way the FCA has done it in the UK has really been ⁓ Practically applied. ⁓ I know back in South Africa they look to markets like the UK, who I guess have been a bit more forward-thinking in their innovation and will and will follow suit. ⁓ but really, as long as people can demonstrate that affordability is done relatively rigorously, it doesn't have to follow traditional affordability methods, but you can demonstrate that ⁓ you've you've let money out responsibly, that fair disclosures, proper disclosures are ⁓ shown to consumers. I just think this thing is here to stay and I guess zooming right into float, I think you're gonna have pretty much every c credit card is going to have some native built in instalments feature. ⁓ and that's always most effective at checkout funded by the merchant. speaker-0: Perfect. Well that's that's a really good vantage point on where things are headed from here. ⁓ Alex, and thanks for letting me quiz you on a pretty pretty broad but as you said, like common thread through throughout all of this. ⁓ it's very clear you know your stuff and I really appreciate your perspective. speaker-1: Cool Ben. Great to chat to you man and thanks to the questions and I hope people enjoy listening to it. speaker-0: And that's the end of my conversation with Alex. I think you'll agree he's a pretty smart guy who's clearly given a lot of thought to the product he's building. And while he reiterated a couple of times though that fashion isn't a major vertical for float right now, I think there's a lot of what he and I just talked about that's probably applicable to what you do and is set to become more applicable as time goes by. Again, I I don't think I've turned a corner on the lending side of BNPL in general, even with the regulations being put in place here. But I have come around on the idea that spreading payments doesn't necessarily mean that an industry is in its death throes or that it's run out of other ideas. Finally, obviously the Interline doesn't offer any financial advice, but if you're sitting with credit card balance right now and you have the means to clear it, you know what to do. I'll be back next week with a very different topic, so thanks for listening today, and I'll talk to you again really soon.