Hi guys, welcome to the Fintech Coffee Break. I’m your host, Isabelle Castro. This week, I sat down with Yaacov Martin, CEO and co-founder of Jifiti, an embedded lending platform offering embedded BNPL.
Conditions for lending have become increasingly challenging as 2023 has rolled out. An uncertain economy and rate hikes have made lenders uneasy. BNPL, a sector facing increased scrutiny and regulation, has been caught in the middle.
I spoke to Yaacov about the macroeconomic effect on lending and how Jifiti’s partnerships with banks have affected its impact on the company and the customers they serve.
Isabelle Castro 0:00
Yaacov, How are you?
Yaacov Martin 0:01
I’m very good. How are you, Isabelle?
Isabelle Castro 0:03
I’m good. Thank you. Thank you for making the time to come on the show.
Yaacov Martin 0:07
My pleasure. Thank you for having me.
Isabelle Castro 0:09
All right, you’re welcome, anytime. To begin with, I want to ask you, besides from fintech, what gets you up in the morning?
Yaacov Martin 0:19
What gets me up in the morning? I think the answer is probably my kids, both practically and figuratively. They’re the ones who wake me up in the morning. And they’re definitely one of my primary reasons for getting up in the morning, I do view myself first and foremost as a as a father. So I guess that gets me up. In the professional sphere, I think there are probably two main tenants to what I spend most of my waking hours on. One is actually the people on the team, forever Jifiti has been a very much family like organisation, people who are committed to each other loyalty each other friendly with one another warm to one another. I always say that the most active face Whatsapp group that I have on my phone is probably the non professional, meaning the social Whatsapp group of the companies, people really love to interact with each other. And they care deeply about each other. So creating that type of environment is is definitely one of the main tenants that gets me to come to work every day, beyond the internal team, we really strive to, to produce value through our solutions and through our platforms. And that’s almost our North Star in terms of decision making, who we work with, who we work for, who we partner with, what type of products are we looking to deploy into the market? What type of financial means are we looking to provide can merchants and their consumers and what types of transactions get us passionate and get us to solve for for existing problems. We’re not looking just to deploy funds. We’re looking to give customers merchants and their customers access to responsible and competitive offers.
Isabelle Castro 2:34
Okay, these are very good things to get you up in the morning, I can see why you’re so motivated. Tell me about your journey to founding Jifiti. I pronounced it right.
Yaacov Martin 2:45
You pronounce it you’ve heard announce it properly. The truth is that that too, goes back to relationships to people. It’s actually interesting. I was approached by a friend or a colleague and a friend from many years before this happened about 12 years ago. I was with my family in in a mall. And I bumped into this friend who went to school with me 10 or 15 years prior. And he said to me, I heard you’re involved in all sorts of different startups. And I have an idea. And he went on to present his idea to me at the time, this is one of our lines of business in the world of retail technology gifting. And he goes on to present this, this idea. And I say to him Hold on, and I ran home or I drove home. And I pulled out a business plan that I put together about eight years prior to that meeting. And I never really acted on it. And I said, read this and tell me if this is what more or less you’re describing to me. And he came back to me a week later. And he said, Yeah, that’s exactly what I’m describing with, you know, certain nuances. And at the time, I was busy with some other things. But he was relentless. And he said, I want to do this, and I want to do this now. And at the beginning I hummed and hawed and I said, Look, I have other things that are keeping me busy right now. I’m not sure I have the bandwidth. And he said, Well, I’m not planning on waiting around. And I said, Well, if that’s the case, I’m not going to let you do this alone. And that’s how we got started, our third partner joined. Following that meeting, another relationship that began outside of the professional world, we spent time mountain biking together and doing other things and then it converted into a business relationship. These two founders are the heart and the soul of this company. Hopefully together with me, and three of us are still working together. every single day as active as as ever, so we hold those relationships dear to our heart.
Isabelle Castro 5:06
Nice. It sounds like this kind of family kind of attitude towards your business started right from the get go right?
Yaacov Martin 5:15
Yeah, very, very much. So it was more of a family than it was almost I would say a corporate organisation, obviously, as you grow, that becomes maybe a little bit harder to maintain. But thankfully, I think those elements are foundational, and they remain a strong foundation of the company. And I think in general, it is a very family oriented organisation, we place a tremendous amount of value on the members being able to spend quality time with their families, we tried to involve families and fun days and so on. Some people claim that there’s something in the water in our water coolers in this organisation because people tend to grow their families. And that’s, that’s a blessing. That’s wonderful.
Isabelle Castro 5:58
Okay, that’s really nice. So Jifiti offers embedded lending and BNPL. Why this approach? what need were you addressing?
Yaacov Martin 6:09
Okay, so, obviously, sorry about that, you’ll have to edit that in the I just came back from vacation with some cold or cough, I’m not exactly sure what it is. So obviously, Jifiti did not invent consumer finance, or embedded lending grower or buy now pay later. What I think that we did realise was that there were many players providing payment terms or buy now pay later for certain types of transactions, usually smaller ones. And therefore, it was okay for them to provide it under certain terms, not necessarily utilise financial institutions with extreme experience and underwriting, risk management, regulation, and so on and so forth. What we found to be somewhat missing on both ends is a sleek, accessible user experience that made it easy to access more significant types of loan loans or payment terms on the one side, and on the financials, financial institution side, we find found them struggling with deployment, meaning they were very good obviously, at putting together balance sheets at competitive rates, at underwriting at risk management. But they had a much harder time making these type of loan programmes accessible to merchants and to their consumers. Because banks by nature, are not necessarily the stars when it comes to retail ecosystem technologies. And when they do enter into that sphere, and they often have to, it is a struggle to deliver rapidly. And therefore I think with time many of them have learned to partner with companies such as ourselves, to provide that facilitation. So we were looking on the one hand, on the one hand, to give access to merchants and consumers to regulated significant types of loan loan programmes and make it a whole lot easier for financial institutions and lenders who are offering those loan programmes to scale and deploy their programmes.
Isabelle Castro 8:32
Okay, so the need is more kind of towards addressing financial institutions need to kind of get into the tech sphere
Yaacov Martin 8:43
in from from a practical standpoint, that is correct. But ultimately, the product of making that accessible is giving consumers and small businesses access to better priced, responsible lending. And that obviously ties back to to the passion, meaning what is it that at the end of the day, gets us up in the morning, it’s not necessarily making another dollar for a corporate bank. It is giving access to consumers and small businesses to the type of financial means that can allow them to grow and to thrive.
Isabelle Castro 9:25
Okay, and then partnering with banks to do that. What does it add on top of, you know, there’s other there’s other lending solutions that come from the fintech sphere, other BNPL providers, which are the lenders themselves, what does partnering with banks bring to these consumers that the other solutions maybe don’t? Yeah,
Yaacov Martin 9:52
so So the banks actually have a few attributes that have been developed over decades, sometimes even centuries. worries that are of extreme value. Number one is, we’re speaking about very stable institutions who are able to weather, the ups and the downs of the economy. They’re here to stay. And therefore, the types of partnerships that are established, are ones that can take into account the longevity of these relationships and plan for the future. Number two is these financial institutions are regulated. And therefore, we can ensure that the small businesses and consumers who are accessing this capital are entering into agreements that are being scrutinised. So that they’re never taken advantage of, so that their well being is protected, the regulator obviously, is constantly monitoring the debt to income ratio. So this ensures that they don’t get into debt way over their head. Number three is that, especially when we are speaking about more significant types of loans, there’s no comparison between the cost of capital that these financial institutions have and therefore the competitive rates that they’re able to offer. Visa vie, the fintechs out there, the fintechs out there generally have to raise these funds on the market, their cost is higher, they need to show obviously, a margin themselves. In a certain environment, maybe they weren’t necessarily having to show that type of profitability, but rather growth today the world has changed, profitability is important. And that does translate to higher rates. So those attributes are ones that we believe that are important for the well being of the small businesses and merchants, sorry, merchants, small businesses and consumers. And we look to leverage that and make it accessible through the technology that we provide.
Isabelle Castro 11:56
Okay, nice. And I mean, right now, lending conditions aren’t great to the consumers, but really, for anyone involved, have you been affected by that.
Yaacov Martin 12:09
So if anything, this has actually been a good time for the segment that we serve, to really shine bright, and to show up when the small businesses and consumers need the most. So often, or I would say, by definition, rates go up when the economy slows. And that usually also means that small businesses and consumers are in greater need of financial aid. So it’s, in theory, almost kind of a lose lose situation, the time that banks can really show up for the small businesses, and the consumers, especially because they can weather the storms, they take this into account in their multi year planning is exactly during these times. And we’ve seen many of our partners really step up to the plate. And that did two things. Number one, I think that really strengthened the relationship that they have with their small businesses and consumers from a brand equity perspective. And number two, their actual business is growing significantly now that there is a need in the market for more significant types of loans. And everybody has become much, much more price sensitive. So this is not a bad time to be a bank with the right set of tools and technology, making your products accessible if you are determined to step up to the plate.
Isabelle Castro 13:42
Okay, nice. I wish more banks were kind of doing this turning to BNPL, I mean it has been a controversial sector, and now it’s facing increased regulation slowly, slowly. What do you think has been the effect on demand and do people still want it?
Yaacov Martin 14:06
Yeah. So, we have actually mapped out a very interesting trend that has taken place between the years 2018, 2019, 2020 all the way to the very end of 2020. With this unbelievable growth of buy now pay later, both in terms of the number of companies offering these types of services, the valuation of these companies, and the market demand. At the end of 2020. Many regulators kind of realised that there may be an issue here. And obviously they wake up when the volumes warrant their attention, and the volumes did and still do warrant their attention. They announced a probe some of them have come back with some guidance. Some of them are are still working on that. But then immediately after December 2020 At start after December 2021, I missed a year there, this was all the way until the end of 2021. The markets also shifted. So starting from the beginning of 2022, you know, we see this extreme slowdown, maybe recession. And that impacted the buy now pay later is in various ways. Number one is those unbelievable valuations shrunk rapidly, sometimes by over 95%. Number two is the smaller buy now pay later is actually didn’t necessarily survive that downturn. But what we’ve been able to see is that the market demand has continued to increase. So all of a sudden, you have this, this gap between the market demand and the ability of many of these players, the fintech players to serve that market demand. And this created kind of that the delta for the regulated financial institutions to fill. So we’re not seeing a slowdown in terms of the market demand. Part of that is due to the fact that the fintechs did an incredible job at making it easy and simple, and almost expected. So we reached the stage where a consumer or a small business that is checking out expects to have multiple ways to pay for their purchase, including paying overtime. So that market demand was that expectation was was created by these fintechs. And that continues to increase. And it continues to diversify. So if once upon a time it was mostly paying three paying for now, the expectation is to have the right type of payment plan or loan offer, depending on the type of transaction at hand. So market demand continues to grow. Some of the fintechs can continue serving certain segments of that demand, and others are left to the larger banks and regulated financial institutions to serve if they choose to do so.
Isabelle Castro 17:01
Okay, so you still get the sense that kind of consumers are still trusting the technology, they still want this kind of BNPL thing, and the controversy hasn’t deterred them.
Yaacov Martin 17:13
So they want the payment plans, they want to have alternatives to cash on hand, they are not necessarily blindly trusting every single provider there that gives another opportunity to trusted brands or banking brands to show up for them at the point of sale, at the Gateway at the shopping cart, in the store and so on. And we are seeing a bit of a shift of this volume from small ticket items, like a pair of sneakers, to more significant type of purchases, not a nice to have, but a must have. So sometimes that is for a medical procedure. Sometimes it is for an educational course or tuition. And sometimes it is for a home improvement project, that these are much larger, they are generally a necessity. And much of that concentration of buy now pay later is moving over to those segments and concentrating in serving the needs of of these businesses and consumers in those verticals and those industries.
Isabelle Castro 18:28
Okay, and I mean, the merchants, where are they in all of this? I know that I mean, companies like Klarna I know that one of the BNPL providers that do their own thing, but they have their own marketplace. Now. I mean, there’s a lot of other factors that have developed out of the initial BNPL offering or merchants still as enthusiastic as they were, or how’s that going?
Yaacov Martin 18:56
Sorry, sorry about that I should mute. So, the the what we’re seeing is that there are a few elements that have have gone into kind of centre stage centerstage are focused on by at least a large merchants, one has to do with customer ownership. Over time as buy now pay later has grown. The customer ownership issue has become a very touchy point. For the large brands and large, large merchants they generally invest a tremendous amount of resources and have built up a loyal customer base over the course of decades. And they are no longer comfortable with giving up that relationship to anyone including a buy now pay later provider. So buy now pay later providers who in the past completely owned the customer relationship once they use their service. And to your point, were encouraged to then go back to shop through the marketplace, as opposed to the merchant themselves. Some of them have found themselves losing business where merchants pull away some of them have found themselves having to compromise somewhat on the customer ownership and what they can and cannot do, or market to. And some merchants have pulled away altogether from any type of offering where they don’t have complete control over the offering and over the customer relationship. So we are definitely seeing a lot of that. And the other element touches on some of the points that I made before were large merchants and brands, who are concerned or at least want to address their consumers, well being late fees, responsible lending, they too are looking to partner only with entities and companies that can align entirely with those values, sometimes be MPLS can and sometimes be MPLS have a harder time doing that. These large merchants usually feel very safe and trusting when partnering with a regulated financial institution.
Isabelle Castro 21:21
Okay, so this makes kind of solutions like gift is even more important, because am I right in thinking you guys don’t have a marketplace, you don’t kind of like,
Yaacov Martin 21:32
that’s correct, we are completely white labelled. So we, we even insist on the large merchants having a direct relationship with the bank or with the lender. And we are behind the scenes ensuring that the right type of user experience has launched that these programmes are implemented swiftly that the right type of offering is matched to the right types of transactions, but we don’t look to own the customers, we don’t even look to promote our brand. Through the solutions that we offer. We are behind the scenes, and therefore those are the programmes that we are engaged in.
Isabelle Castro 22:07
Okay, nice. And then going back to the regulatory environment, where How are you guys positioned? Is your BNPL? Does your BNPL have to change the affected at all? What’s going on on that level? Yeah, so
Yaacov Martin 22:22
So we chose this route. Quite a while back, where we were focused primarily on the types of programmes and loans that are offered by regulated institutions. And therefore, even when we designed and orchestrated our platforms, compliance and regulatory requirements were all taken into account, we actually had to take quite a bit of time before we scaled our business in order to ensure that we can scale and remain under the regulator’s umbrella or within the framework that we were required to operate in, especially when our services cross borders, or at least where we offered our platform in multiple markets. So this did not impact us because to begin with, we were operating primarily within the regulated sphere, we do have products and capabilities and offers for non regulated types of pain, three pain for us as well, and we deploy them. But we make sure that those are deployed only where they are relevant and not where they’re there. Unnecessarily pushing consumers or small businesses into payment plans that they shouldn’t be taking to begin with.
Isabelle Castro 23:46
Okay, so you kind of like vet them before you even that is correct. Okay, cool. Well, we’ve got to the end of our time for the for the main interview, but before you go, I’ve got a few questions to ask you. Just to wrap up. First of all, what’s a piece of advice that you have been given that you would give to someone else?
Yaacov Martin 24:12
I’ll give you at least one. Obviously, the the life of startup is not one that is always just glorious, there are ups and downs and the ups can become you know, a whole lot higher but the downs you can come crashing down when something doesn’t work out. So it’s a roller coaster. And that can affect you emotionally, it can affect your mental well being it can affect the stress levels that you operate, within or under. And that’s, that’s a big deal to take on and to deal with, especially if you have other priorities in your life like family. There isn’t a magic potion or recipe that can just cure that type of rule. Look closer, emotional rollercoaster. But advice that I’ve heard, or actually, to a certain degree been brought up with is a very healthy portion of gratitude. It is extremely important, especially during the hard times to be able to step out and to be grateful for what is. So, you know, you sometimes say, oh my gosh, I’m dealing with this unbelievable crisis. But what’s the alternative? The alternative would be, maybe not to have a one be surrounded by wonderful people in a wonderful company, where that also includes the downs, but being out of work altogether. So yes, you are operating at the highest of levels with credit, mission critical type of technologies, and banks and institutions and clients and partners and team members. And that includes some of these crisis’s be grateful for the fact that you can even have a crisis like this. And that I find to be often a balancing act, but an ingredient that has to constantly be there be in order to balance out some of those emotional roller coasters. So be grateful. Grateful for everything you have.
Isabelle Castro 26:13
Nice. I like that because you can take that out of the kind of startup context and literally apply it to everything right. It’s almost like a mindfulness thing. Nice. Okay, your curveball question aside from founding a fintech company. And I heard that early on in the interview that you said that you go mountain biking. So aside from that, what’s the most adventurous thing you have done?
Yaacov Martin 26:42
That is very good question. Well, you know, I sometimes think about the risks that we sometimes take, in our professional life, do we take those same types of risks, risks outside our professional life, just to give you an example, you know, when somebody is falling for someone romantically, let’s say, and you become vulnerable, all of a sudden, are you willing to take that risk? I mean, in your business, you’re willing to take this risk, you raised funds, now you’re gonna go out and either fail, or make it huge. That’s risky, we’re willing to take so take those risks outside of your professional life as well. So what is the most adventurous thing that I have done? So definitely getting married? almost 20 years ago, that is a huge plunge that you take. And no one should ever tell me that there are no risks associated with that you’re risking everything emotionally, and, but the reward can be huge. So I would probably say that getting married was the most adventurous than having kids, especially five of them. That’s pretty adventurous.
Isabelle Castro 27:47
Wow. Okay, that must have been quite well, that must be quite an adventure. So
Yaacov Martin 27:53
it is quite adventurous. And you know, I would like to say, oh, you know, skydiving or rappelling or waterskiing, but really, to be honest with you. None of that is as adventurous as raising five kids who span 18 to five years old, and dealing with the various issues in between. So I would say that’s probably the most adventurous thing that I did and continue to do every day.
Isabelle Castro 28:14
Okay, nice. I really liked that that took a tonne that I was not expecting. And I like it. Thank you for that. Before you go, how can people get a hold of you follow Jeff T follow you? What are the details?
Yaacov Martin 28:29
Sure. So first of all, hopefully, we are very approachable and reachable. And anyone can write to basically anything at Jifiti, and get a response or at Jifiti.com. My personal email is just my first name Yaacov, which is not a very popular name. So maybe you’ll remember it. Yaacov@jifiti.com. We are very good on LinkedIn. And I would say we are not very good on Instagram, Twitter, or Facebook. But LinkedIn has happens to be a platform and an environment that we enjoy interacting through. So please hit us up there. You’ll hear from us very, very quickly.
Isabelle Castro 29:14
Okay, cool. I’m with you on the LinkedIn opinion. I’m with you on that. Well, thank you. Thank you so much for your time. I’ve really enjoyed our conversation and have a great rest of your day.
Yaacov Martin 29:26
Thank you. Thank you, too.
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