In America, when you swipe your credit card, your bank has given you a loan which if you do not pay off at the end of the month, will attract an interest. Yes, that process of issuing a rolling loan via a credit card simplified what typically would have required going to a bank, filling a form, getting approval, etc.
The banks made tons of money through this business model. Until a generation of young people came. Yes, the millennials hate paying for interests: they are value seekers. And because of that, a new generation of innovators invented a new product which is called Buy Now, Pay Later.
What this does is magical: you can buy most things and spread the payment over months and pay absolutely zero interest! Of course, the merchants do pay those interests, by playing on volume, through discounting with the startups. The Buy Now, Pay Later competes with credit cards.
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Goldman Sachs understands this disintermediation as you can have those cards and no one will care to get them or if they do get them, use them, since someone is offering them zero-interests over 4 months. Without adoption and usage of the cards, interest revenue nosedives.
That is why GS is paying GreenSky to buy $2.2 billion. I will be explaining this more on Saturday during Tekedia Business Growth Playbook session.
This could work in Nigeria and Africa with a little flavouring.
The Goldman Sachs Group, Inc. (“Goldman Sachs”) and GreenSky, Inc. (“GreenSky”; NASDAQ: GSKY) today announced that they have entered into a definitive agreement pursuant to which Goldman Sachs will acquire GreenSky, the largest fintech platform for home improvement consumer loan originations, in an all-stock transaction valued at approximately $2.24 billion. GreenSky’s differentiated lending capabilities and market-leading merchant and consumer ecosystem will help accelerate the efforts of Goldman Sachs to create the consumer banking platform of the future, help tens of millions of customers take control of their financial lives and drive higher, more durable returns.
- Goldman Sachs is acquiring fintech lender GreenSky for $2.24 billion as the investment bank pushes further into consumer finance.
- The all-stock deal for GreenSky, called the biggest fintech platform for home improvement loans in a release announcing the deal, is expected to close by the first quarter of 2022, the companies said on Wednesday.
- GreenSky shares jumped 44% in premarket trading before they were halted.
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Please, aside costumer data, why do you think it would take time before it scale here in Nigeria?
How do you advance credit to people with no sources of income? Whoever figures it out, it will surely rank up there with all the things competing for the 8th Wonder of the World crown!
Of course the BNPL model can work here, but not on consumables, it will be too chaotic there. You cannot go to a nice restaurant and after eating, you opt for BNPL, when you will still be hungry next time…
But on products and services with longer lifetime value, the model could be great. Let’s say for smartphone and laptop, you can opt for BNPL, with payment spread over 18 months or two years, that way, a lot more people can have access to brand new smartphones and laptops. It’s actually the sort of business model that can scale here, as long as the pioneers are not greedy, because once you jack up the price like they do for car loan or mortgage, you have actually killed the model.
It will also work well in both healthcare and education sector, a surgery of N1 million naira, with BNPL spread over two years, the patient will be more confident to enter the theatre, instead of looking for where to raise half a million. For education or skill training module, the value is palpable.
Some exciting business models can truly lift this economy and our people, as long as we can tame our excessive greed and bad behaviour.
Thank you for this