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Americas Series with David Yakobovitch: How FinTech can make retail purchases more inclusive with Katapult's CEO, Orlando Zayas

by Rudolf Falat
September 9th 2021

In this episode of the Americas Series, David Yakobovitch spoke to Orlando Z... More

voice of Fintech. Okay yeah, okay. Hello and welcome to voice of integer America series. My name is really Fallon and I'm the founder of voice of intake podcast in this series. You will hear inspirational stories of entrepreneurs, investors and incumbents and ecosystem hub leaders from the United States or north America and Latin. This episode is hosted by David Yakubu bitch from new york. Welcome back listeners to voice of Fintech, your top global podcast where we feature leaders and executives building the future of Fintech today. I'm delighted to bring to you Orlando's obvious who's the ceo of catapult Catapults transforming the industry through retail purchases, making them more inclusive. And they recently had some really exciting announcements on the public market Orlando, thanks so much for joining us on the show. Thanks David for having me appreciate it. Well, just to start off our listeners love to hear about yourself. You've been around as a seasoned executive with multiple companies. What's tell us a little about your story and what lead you around four years ago to launch catapult Sure, I was raised in Maryland an army last of five kids had to fend for myself early on and I've always been very entrepreneurial even from the start when I was a kid and I went to work, I think my biggest change in my career was when I worked for General Electric and I was like, I like general Electric surprisingly because it was very entrepreneurial and it was like running a business without having to worry about payroll.

So it was actually a lot of fun and then I ended up at the credit card business where we focused on credit card lending point of sale and that's where I learned more about point of sale lending and prime consumers and realizing that the non prime consumer was left behind and I have got an opportunity to run a business at the new Hampshire that was focused on the non prime consumer and that's where I cut my chops if you will, grew that business pretty dramatically and then left there to join what was called Z B at the time, which was focused on e commerce. And I think that was a need that focused focusing on the non prime consumer, giving them access to Strong quality retailers like Wayfair and Lenovo gives them the buying power to get the things they need for everyday living. So that's what drew me to the opportunity. I actually didn't start the business David. I, I took it on pretty early on from the founders and we turned it into a pretty strong growth engine and like you said, we have some exciting news. We went public on June 10 via and talking about Catapult and its growth over the years, tell us a little bit about the product and why you've been so excited to grow the business.

Sure. Like I mentioned the, it's really point of sale e commerce and so if you look at points that one of the things I realized when I was a general electric, um Izz E commerce was something that was even nascent for for Jet on a point of sale and they struggled with it because it's a different animal when you're focused on e commerce. And the one thing I realized is that the non prime consumer was left behind. So we established a group Catapult focusing on this non prime consumer being left behind. If you will from, from buying quality merchandise set at Wayfair and because we use the lease to own way of, they can get durable goods which is appliances, electronics and things like laptops, things that they need for everyday living. And especially after the covid experience, everybody needed laptop just to teach their kids go, we're helping to bring those quality products at a reasonable price to those consumers that pretty much were left behind. And maybe we're, you know, going to a payday lender or finding some other source of income to buy those needed goods because if your refrigerator breaks down, you don't have a choice.

You've got to get one right away. I imagine during the pandemic in fact a lot of those durable goods, all homes and all families were purchasing them because no one was traveling. I read during the pandemic that home depot had record earnings because everyone was doing home renovations. So whether some of the trends that you saw through your business a catapult as a result of the pandemic. Yeah, it was pretty amazing. Our second quarter in 2020 was was very very very strong. I think our partnership with Wayfair and and Lenovo helped boost that because you're right. People were stuck at home. They were looking at that old couch they were sitting on probably a lot longer now than they were a few months before Covid happened and they wanted to replace it. And then I think with the the stimulus money that the government came through with, they weren't they had the money in their pocket but they didn't have ways to spend it. Like before they aren't going to the theater, they weren't going to football games, they were staying at home. So I think the focus was making home really home sweet home.

Now. Orlando you mentioned the stimulus checks as we know that the U. S. Administration went through several rounds of stimulus to support consumers and those who were left behind. And so buying power has changed a lot as a result of the pandemic. Whether some of those changes that you saw and how catapults help bridge that gap. Well, we've seen a much more responsive customer in other words, I think because they're signing up for a payment plan, they're not having to spend $800 on a sofa that can spread the payments out. But what we found is they became very responsible and paid paid off their leases early. We saw increased payoffs and that's what we like to see. We like to see the customers get to ownership as quick as possible and very responsible. I want one of the interesting things that we saw in 2020 was pre payment. So people were making their payments ahead of time and we like that because obviously it reduces your risk, but more importantly it was getting those customers paid off as quickly as possible and that's something that we strive for.

I love pre payment in fact have a mortgage and I'm always doing 1.5 payments. It's great to pay things off faster when we have the opportunity and sometimes we don't know about that opportunity but technology can help accelerate that. I know that your team has built some powerful technology augmented by AI and machine learning. How have those tools been helpful accountable? They've been amazing for us. The online is a much different animal when you're doing underwriting and you're looking at this customer. And so it's helped us really hone in our fraud tools because fraud can kill a business. We've been able not only hone our fraud detection because of Ai and machine learning, but just the general underwriting. So we've been able to approve more and more customers. Just in the last 18 months, our approval rating as climb pretty dramatically and were able to identify those customers that are obviously more likely to pay us off and they are, who they are, who they say they are. I think what's so fascinating about all the business models that you've talked about are being augmented by the Ai and Ml technology has perhaps created for your Orlando the opportunity to have your buy now pay later product or B.

M. P. L. To be so successful. I mean years ago we do consignment and we go to the shops and say I'll owe you, but there's no way to verify that. And and it sounds like your team got the secret sauce here to successfully build a B. M. P. L. Product and it continues to get better and better our underwriting because of Ai and machine learning just gets better or fraud detection gets. We had a fraud ring that hit us a couple years ago and we were able to detect it really quickly and clamp it down. And but that information fed into our models and so we're able to identify somebody, for example, is logged in from san Diego California, but their addresses in new york. Yeah, that's probably a questionable application you should look at unless there my uncle who lives in san Diego and they're visiting me in new york. That's why we verify right so that we can successfully do that. And there's a lot of financial products out there. I know you've differentiated yourself from a firm and Clara and others.

Why do you think now is a great time for customers and businesses to partner with Catapult, Well it brings a new, we bring a new customer to that to that retailer. So for example, we have a partnership with a firm and for example at purple mattress. If you were to apply for a firm financing and get turned down, your data would come to us automatically. And within less than five seconds we'd return hopefully the approval and all the explanation of what exactly the product the terms are. And so it really by doing the waterfall as we call it. You can capture every consumer. I worked on the prime lending space when I was A G. E. And the retailers want you to approve 100%. But that just never happens. And so what happens to that consumer that gets turned down it becomes a cart abandonment issue right? They needed financing to get that item. They got turned down they usually disappear. And so we help that retailer capture that consumer at the time they're buying, give them a product where they can pay it off.

That's very flexible and transparent And clear and they can pay it off for as little as 5% in 90 days. And our MPS scores are strong, especially for lower in the 50s. Our trust pilot scores are strong. Our customer repeat rate is really strong. Our customers repeat over 50% of our customers come back and at least with us again. And so we can send those to multiple retailers. So for example, somebody leases a Lenovo laptop, you're only going to buy somebody laptops or a purple map, but the next time you come in and we're going to say well you can use that open to buy or the next lease approval at Wayfair and buy just about anything away for. So we see as a great opportunity to service this passed over consumer and bring a new consumer to these retailers and I think Wayfair has proven that it works and they've been a long time partner of ours and they see the incremental salary but they also appreciate the repeat business because it lowers the cost of acquisition. I think it's exciting to see that there's products all across the marketplace from Wayfair telenovela to purple mattress that you work with to accelerate consumer access to products that they wouldn't have before.

And that's only going to get accelerate further now because Orlando, you recently announced that Catapult is going public, they've recently gone public via a merger with the speech Finn SErv, can you share more with our audience about going public? Sure. Last year, in the summer we were the board and I were deciding, you know what the next steps of the business or we were going pretty fast obviously with the lockdowns, but really the focus on e commerce and the move by many consumers to focus on e commerce and we thought it was a good time to look at strategic alternatives. So we hired an investment banker and the idea of a spat came up and I'll be honest with you probably a month before that I don't even know what a SPAC and so I dug into it, understood it and it's a great way to go public is when it's passed. You can you not only have the money that the SPAC raised and they're going public with that, but then you go out and raise money through other investors and then when you merge is technically considered a merger, You're the surviving company.

The ticker changes that day. So on June 10 of June nine we finalized the deal closed. The deal been served disappears and the new ticker symbol is K P. L. T. And that was on premiered on june 10 And I did get just a note saying we'll be ringing the bell on July eight. Super exciting to see you ring that bell and as you've gone public that means there's a lot of growth, a lot of acceleration for revenue and the business. Can you share with our audience more about your approach to revenue growth? Sure. We think it's a Greenfield opportunity. We believe our total addressable markets between 40 and 50 billion and that's just online consumers that are non prime that don't have access to a firm or some of the payment methods. The buy now pay later is because they either maxed out on their credit card or credit cards or they've had a credit issue in the past. And so we want to help those consistent because they're not buying luxury goods, they're buying durable goods, things they need furniture for their home refrigerators.

And so we think there's a, we know there's a Greenfield opportunity, we've obviously grown almost doubled every year since I took over the business and we continue that growth trajectory and it's really about the consumer and focusing on the consumer being cleared. Being transparent, for example, we don't charge late fees and there's no other hidden charges were very transparent about what the customer is paying and they have options along the way to pay it off and and reduce the cost of ownership. And I think that works well and and it really is about financial inclusion because If you're a single mother with three kids and your refrigerator breaks down, you know, you gotta get a refrigerator today or as quick as possible you're gonna spoil a lot of food that you might not afford to repay. So are replenished, so we help that consumer get the items they need from a quality retailer. And in the past, what would happen to that consumers that end up going to a local rent to own store and will be offered the avocado green or the harvest yellow refrigerator because that's all they had in stock and they'll be stuck with something typically substandard equipment.

So we give them the opportunity to shop at high quality retailers refrigerator example is a great partner with you probably know Pc Richards in new york area. Pc Richards is one of our clients have been with us for a long time and that woman, she could easily get a refrigerator probably delivered to your door the very next day. You're using Catapult in there. Check out, Looking to the future. You mentioned that catapult has a market cap of a $40.50 billion dollar business. Whether you see as some of the emerging updates, product updates over the next few years to continue to grow on the public markets. Sure, yeah, the 40 to 50 was our addressable market to be clear. Yes. So I want the business to be 40 50 market cap anyway, we think that looking at other products focusing on the non prime consumer, which good times bad times the non prime consumers always there. And you know, I think the research reports that I read Say about 40% of the us population falls into that category.

And the prime lenders aren't always there for them during the financial crisis. I even got turned down for our credit card because they tightened up underwriting so much and and because we focus on durable goods were able to be a lot more flexible. But I think looking at that market and saying what other needs, does that market need other other financial tools to help build their credit etcetera. We want to focus on that non prime consumer because the big guys are focusing on the prime consumer which is a bigger market but this one takes a little bit more hand holding and I think there's just a lot of opportunity to come up with those products where you know the customer is helped out and gets through their tough time. Well, Orlando congratulations on going public and joining those markets. Catapult today is traded on the NASDAQ with symbol KPl T and today's show voice of Fintech, we featured Orlando's a is the Ceo of Catapult. Orlando. Thanks for joining us on the show. Great David, thank you very much. I appreciate the time. Okay, thank you for listening to voice of Fintech podcast if you haven't already check out also Voice of intake dot com where you will find all the episodes and additional resources related to the podcast.

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Americas Series with David Yakobovitch: How FinTech can make retail purchases more inclusive with Katapult's CEO, Orlando Zayas
Americas Series with David Yakobovitch: How FinTech can make retail purchases more inclusive with Katapult's CEO, Orlando Zayas
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