You wake up with a terrible, unbearable toothache. You take painkillers but they don’t help at all. So, you cancel all your plans and run to the dentist.
After x-rays, they tell you that the painful tooth needs to be pulled and replaced with an implant. The dentist doesn’t need to say it. You already know that the damage to your pocket will be significant. The dentist says NIS 12,000, and this amount hurts more than the tooth.
Naturally, with an expense like this, you want to use your credit card, but because your credit line has recently shrunk, payments are no longer possible. You could ask your bank for an all-purpose loan, but you realize that interest rates have risen beyond ten percent. Fortunately, the dentist says that the practice works with the BNPL service, and suggests that you divide the amount up to 42 payments, which don’t interfere with your credit limit.
About four years ago, the state passed the Strum Act, which was intended to increase competition and prevent centralization in the banking market. The intentions were good, but many Israelis found themselves with a new credit line that was reduced by half. That is, the amount they can use the card for was cut in half. Often, people see those large transactions, which they used to make with a credit card, routinely max out their credit and this is frustrating to consumers. And at the same time interest rates they pay to the banks on all-purpose loans don’t stop increasing.
This problem has been resolved in many countries and is part of the digital payments' revolution called BNPL or Buy Now Pay Later, a service which allows one to buy a service or item with payments which don’t use the bank's credit line or issued credit card.
The BNPL field is experiencing tremendous growth worldwide, with companies like Affirm, AfterPay, Klarna and others which are valued at billions of dollars and traded on the New York Stock Exchange. This is the new financial future in which banks are no longer the only body offering customers financial services. Now, a variety of companies specialize in different areas and offer their services to customers of all banks.
The BNPL service is offered in Israel by Blender, a fintech company and non-bank credit that was launched on the Tel Aviv Stock Exchange in January this year. The company operates in four countries in Europe and is in the process of obtaining a license to operate a digital bank in Europe.
Blender’s service is provided at more than a thousand points of sale in the country including electronics stores, furniture companies, cosmetics salons, dentists, etc. and leading websites, at the time of purchase, for purchases over NIS 1000. It’s possible to receive a spread of between 6 and 42 payments by standing order, which leaves your credit line available.
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The Israeli market for purchases of NIS 3000 or more is about NIS 30 billion a year, not including buying cars. The average credit line is NIS 12,000 per month. With the introduction of a pre-existing law the numbers are shrinking and consumers are facing a significant problem. Although credit cards can also be used to spread out payments for purchases, the amount of the credit line is used as the balance of the unpaid purchase. So, if you paid the dentist NIS 12,000 in ten monthly payments of NIS 1200 this will use up NIS 12,000 from the credit line in the first month, which in many cases prevents additional purchases. Blender offers to divide the purchase into up to 42 payments.
Without getting involved with interest rate calculations, with a repayment schedule or percentages, which aren’t always clear and obvious to those who don’t have a master's in economics, the average interest with Blender is NIS 4 for every NIS 1000.
So, if you paid 12,000 shekels to the dentist, the interest for payments will be only 48 shekels. You bought a TV for NIS 5000 and divided it into ten payments of NIS 500; pay only NIS 20 interest. And if you want to close the entire payment before the end of the date you determine in advance, you can without an early repayment fee. This is what the new financial world looks like, a technological platform that allows you to spread payments at the time of purchase in a way that is convenient and appropriate to your needs and financial priorities.
"In recent years, there has been a change in the way we deal with financial institutions," says Dr. Gal Aviv, CEO and founder of Blender together with Boaz Aviv and Barak Gur. "The conduct of households in Israel was wrong and had the most expensive overdraft there is, with interest rates reaching up to 15%. Now, the attitude of the young, the new generation is that they no longer take loans that will put them in the red. They know what their income is and what their expenses are and are strictly in control of their expenses.”
"The service we offer is the new way of proper financial management. We tell people not to take loans for any purpose. It’s money that goes into your checking account and is swallowed up by the minus. Take the money you need for the designated purchase and keep it separate from your standard bank account."
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One major financial force which believes in the new banking that Blender offers is Bank Hapoalim. The bank and Blender recently reached an agreement to establish a joint company to provide digital consumer credit to finance purchases at points of sale and on e-commerce sites. The joint company will be held 20% by Bank Hapoalim and 80% by Blender.
"The bank strongly believes in the BNPL field. Today we see the real need in the market for digital financing solutions as part of the customer's buying experience," said the commissioner for corporate business development and fintech at Bank Hapoalim's Innovation and Strategy Division, Avivit Bender. "We want to be the first choice of fintech companies in Israel with the aim of providing customers with an advanced and innovative service experience anywhere and anytime.”
Aviv added: "The agreement with Bank Hapoalim is a great expression of the bank's trust both in the field of BNPL and specifically with Blender. We see today the real need in the market for fast digital financing solutions. Consumers today are very technological and are adopting innovations at a rapid pace. This is a real revolution. There is no doubt that Blender's unique technology and our wide deployment in points of sale, along with the bank's strength and resilience, produce a leading product that will be a good consumer alternative for the general public in Israel.”
"Banks understand that there is a significant advantage to joining startups," adds Aviv. "If in the beginning they bought fintech companies and 'swallowed' them, today they understand that in order to do it right they leave them as independent, growing and dynamic companies. This allows us to maintain the DNA of a startup company with technological accessibility and most importantly it enables us to work with the entire market and not give a solution only to customers of one bank.”
Blender currently provides the new service to 42,000 customers. "We offer the products in a simple and accessible way at thousands of points of sale, because in the end convenience wins," says Aviv. "It's an easy and simple product to use and also the most transparent which is the most important element for us as this is our vision."
Aviv says that Israeli business owners are warmly embracing the new service. "We set up the technology in 2017 and started using it in our European operations. In Israel, the penetration of the service was slow," he admits. "But since the Strum Committee and the cuts in credit lines for consumers, business owners have seen that the service offers a good alternative to their customers and they have started contacting us and asking us to add the service to their businesses."
Recently Aviv, an amateur musician, went to buy a new electric piano for his house in a large store. "I chose a piano and at the time of purchase, the store manager offered me with great enthusiasm to divide the payments with the help of Blender. He didn’t know me, and he told me that that morning a guy came to buy a music system and his credit card didn’t honor the payment, but by using Blender he was able to make the purchase. Only then did I tell him who I was and he told me that thanks to us the world is changing for the better. "
In January, Blender transformed from a private fintech company into a public company traded on the Tel Aviv Stock Exchange, the first fintech company to complete the move. The company completed an offering that included shares and 2 rounds of options, for about NIS 80.5 million, according to a company market value of NIS 292.5 million. "We hope to see more companies in the fintech field joining the Tel Aviv Stock Exchange, which will increase competition for private consumers and enable them to receive financial services efficiently and at low costs,” said Lior Navon, director of the sales and development unit at the stock exchange.
Aviv said that the process was interesting. He added that “In a public company, in parallel with strategic development, it’s necessary to meet quarterly goals quickly and accurately. For this purpose, we expanded the administrative layer. In Israel, we hired Gil Stav, formerly VP of Marketing and Sales at Israir and abroad, and brought in managers from other countries who are highly experienced in the field of banking. The company currently employs 75 people at the company's headquarters in Israel and at branches abroad.”
This article was written in cooperation with Blender.