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When it comes to embedded lending, point of sale is really where the action is at. We have seen the explosion of BNPL volume over the last decade, but not every point of sale transaction is suitable for those platforms. Then we have banks, who have missed out on the credit card volume that has been lost to BNPL. Ideally, they would like to embed a lending solution into the point of sale that they control. This is where our guest today comes in.
My next guest on the Fintech One-on-One podcast is Yaacov Martin, the CEO and Co-Founder of Jifiti. Based in Israel, but doing business globally, Jifiti works with large banks to customize embedded lending solutions at the point of sale that they can control. How this technology works and what it means for the future of lending is the focus of this conversation.
In this podcast you will learn:
- The roots of Jifiti and how it began in the gifting business.
- Why IKEA encouraged them to move into lending.
- What they have created in embedded lending that is unique.
- How their technology works on the backend.
- How they work with the credit box of the lender.
- Why they chose to focus on banks in their go to market strategy.
- How they work with Citizens Bank as an example.
- The range of order sizes that they are working with today.
- What Yaacov has learned from working with large banks.
- Why the bank-fintech partnership challenges of 2024 hasn’t impacted Jifiti.
- How their recently launched Tap Now Pay Later technology works.
- The beauty of working with digital wallets today.
- How they can power an installment loan through a wallet transaction.
- How they adapted their technology to work in different global markets.
- The scale that Jifiti is at today.
- His vision for the future of embedded finance.
Read a transcription of our conversation below.
FINTECH ONE-ON-ONE PODCAST NO. 513 – YAACOV MARTIN
Yaacov Martin: First and foremost, this is a fundamental learning that is probably true not only to our industry, but rather to these types of partnerships. And that is that relationships, trust, and loyalty trumps all. It is impossible to describe the value of building trust, which allows you often to overcome many, many obstacles. You could be providing the greatest solution in the world, but if there isn’t a deep sense of trust, especially in industries where we are providing critical infrastructure. If there isn’t that foundation of trust and real partnership, then the longevity of those partnerships tends to be challenged. And I can tell you that the relationships, both on an organizational and personal level, have been absolutely hands down the most valuable thing that we’ve developed with many of our partners.
Peter Renton: This is the Fintech One-on-One Podcast, the show for fintech enthusiasts looking to better understand the leaders shaping fintech and banking today. My name is Peter Renton and since 2013, I have been conducting in-depth interviews with fintech founders and banking executives. On the show today, we have Yaacov Martin, the CEO and Co-Founder of Jifiti. They are one of the world leaders in embedded lending, and they work with some of the largest banks on the planet to enable state-of-the-art point-of-sale finance. How they got there is an interesting story that Yaacov shares. But what is most interesting is how they partner with the banks. This is not your typical bank-fintech partnership, as Yaacov explains. We also discuss their digital wallet technology and why that has been so important in rolling out their product to a large number of consumers.
Now, let’s get on with the show.
Welcome to the podcast, Yaacov.
YM: Thank you for having me. It’s a pleasure to be here.
PR: My pleasure. So let’s kick it off by giving the listeners just a little bit of background about yourself. Why don’t you tell us where you’re from and what your background is?
YM: Sure. So personally, I was born in the States, although my parents moved to Israel when I was just about a year old. I started Jifiti in Israel with two partners, one with a very similar background to myself in terms of nationality, and the other is a pure Israeli born and bred. We have been doing this for quite a while now in the fintech world, for over a decade. We’ve evolved like many other companies. However, there are very clear remnants from our early days, which we’re very proud of. Those products are alive and kicking, but it seems like we also learn how to reinvent ourselves as time goes on, and we learn about market needs, certain capabilities, and other types of creative solutions.
PR: Sure. So let’s talk about that. You started Jifiti not doing what you’re doing now. You had a different idea. Why don’t you tell us about that idea and why you pivoted?
YM: My story is actually quite personal. I met my wife-to-be when I was quite young. I think I was probably around 22 or 23. My wife, being South African but having immigrated to the U.S., took me to register for gifts right after we got engaged. That was a foreign concept to me. It remains foreign, by the way, in many, many countries. However, at the time and still today, to some degree in the US, it’s almost standard practice. It was interesting at the time; these were the early days of real significant e-commerce. And I remember she took me to a Bed Bath and Beyond. They took us into an office and sat us down. They seemed to have somebody who was dedicated to onboarding couples who were registering for gifts. And once they took certain details down, they handed me a barcode scanner. Quite an industrial one without any type of screen or anything at all, just a bunch of buttons. My wife, back then, my fiancé, said, “I’m going to sit here.” She’s not very into shopping, “and you will pick me up when you’re done.” I ran around the store, and I felt like a kid in a candy store because I realized that what I was to do was to pick and choose anything that I’d like, scan it, and then it’s not coming off my tab. Somebody else is going to either come into the store to buy it or buy it online. Anyway, to make a long story short, the experience really stayed with me for quite a while after we got married, I kept thinking about this in-store experience as opposed to the online e-commerce that was emerging. A decade later, I ran into a childhood friend, and he said that he understood that I was into all sorts of other ventures. And he said, “I wanted to pitch something to you.” And he starts describing to me this registry model that is kind of on steroids, very, very similar to what I was working on. I said to him, “Please hang on.” And I ran home, and I brought him a business plan that I wrote many years beforehand. And I said, “Read this.” And he came back to me a few weeks later, and he said, “Yes, this is what I want to do.” He wanted to do it locally. I told him, “Then I’m not interested; I want to do this for markets where the concept is already developed, and we’re going to take it in different directions.” Long story short, we started a company and started building a prototype that would essentially allow, this was already, of course, after e-commerce really did develop, would allow for various instances, not only weddings but any instance where you have a gifting scenario, it allows you to select and allows others to transact online. And we really wanted this to cater to every store, not be limited to one brand. And that’s when I started learning about the true struggle of integrating into point-of-sale, payment challenges, and so on. So that was really the way that we started with our first platform. We figured out that these pieces of integration can kill any good deal, any good product, and we had to start figuring out how we can bring these things to life without having to go through deep, deep integration. We essentially found solutions that were able to ride on existing payment rails. We did this through prepaid cards, open-loop cards, but really understanding those networks and those rails and figuring out how we can load the funds for the transaction onto those rails. And whatever experience we want to build around it is fine. We can host that experience, but ultimately, when we push a transaction through, we can avoid many of those lengthy and expensive integration processes.
PR: Okay. So, how do you go from there to where you are today with embedded lending?
YM: Excellent question. So essentially, we spent a few years, about five or six years, developing these products that allowed for various gifting processes to take place in-store or online, avoiding the integration to point-of-sale. We launched a gift registry with IKEA in the U.S. and the beauty of that system was the fact that we did not touch any of their systems. Obviously, it was branded for IKEA. We were hosting the entire experience, and it lived on consumers’ mobile phones through an app. They were able to walk into the store, scan items, and do it online. It allowed their friends and family to contribute or to buy those items. One of the features was that you could take all of the funds that were put towards that registry and utilize them in the form of store credit. And we did all of that without touching any of their systems. And we did this for a whole bunch of brands. We built up prepaid marketplaces that websites were able to integrate. To this day, we power these types of prepaid gift card marketplaces that websites were able to embed as an upsell. How does this lead us to where we are today? Many of our clients came to us and said, “What you’ve basically done for us is you’ve been able to launch an experience that brings us incremental sales in the world of gifting. And you did this without any integration whatsoever. And that’s nice. It’s nice to have. But there’s another area that is a must-have, and it’s absolutely critical, and that is finance.” If you think of brands like IKEA, where you have plenty of items or purchases, that probably calls at least for some consumers to find a way to finance. If you’re going into an IKEA to buy a kitchen, you may very well look for finance. Of course, many of these types of specialty retail stores or other types of services had to have some kind of arrangement in place, but it always took a very, very long time because they had to integrate into all of their systems. I mean, if you think about it, any retailer or service provider who wanted to offer finance would generally try to partner with a financial institution and then figure out a way for customers of theirs to apply for a loan, try to get a real-time decision, and then somehow have that entire transaction funded at point-of-sale. You can only imagine what went into this. Many of our clients with IKEA at the helm said to us, “You’ve done this. You did this already in the gifting arena. Use that same infrastructure know-how to connect IKEA’s business with whichever bank or financier that we decide to work with, offer it to the consumer, and you can bridge that triangle with your infrastructure and create a real-time experience without us needing to absolutely rip open our point-of-sale reconciliation processes.” And that’s how we started.
PR: Okay. So where are you now? Where are you today?
YM: Actually, in order to bring things down to earth, I’m going to describe to you kind of a before and after, how things took place before we entered the market and what we did in embedded lending in order to A, streamline the process, B, eliminate many of these obstacles that stood in the way and improve the experience. So, if you think about it, even 20 or 30 years ago, in certain industries, a consumer was able to walk into the dealership or into the store. This is for secured loans, for example, car leases, but also unsecured. And if they had some sort of partnership with a financier or another financial institution, the customer was able to fill out some sort of application for finance. Now, sometimes that took a day, and sometimes it took a week, but that application was sent somewhere, and maybe somebody rang them up and said, “Okay, you’ve been approved. You can now come and collect the goods and sign off on the loan documentation.” Fast forward a few years, if you were lucky, you walked into one of these establishments, you went shopping, let’s take an IKEA as an example, you took the whole IKEA tour, and you selected the items that you may be interested in because you saw that there was some sign that said that you could apply for finance. And when you queued up to check out with the goods that you’ve accumulated, you may ask, “I saw you offer finance. Can I please apply?” If you were lucky, they pulled something digital up, and they started asking you all these personal questions, such as your annual income. And meanwhile, you have a line of people behind you, and you give over this information, and you may very well be declined. And then what do you do? You leave your things at the till, and you take a walk of shame, a terrible experience. In any case, what had to go into making this all happen, of course, was integrating a new payment method into the point of sale, et cetera, which was very difficult. And we turned this thing on its head. We said, for example, in today’s day and age, there’s no reason that you need to wait for the end of your shopping experience in order to apply. If you’re in a store or online, you click a button; you can do this on your mobile phone if you’re in the store by scanning a QR code or pressing the button on the website, and you fill out an application that we host. That application captures all of the information that is needed. You don’t have to share it with anybody. You do this discreetly. You do this before you enter the store. You do this so that you know what your purchase power is. We take all of that information, and through an API, we feed it into the lender or the bank. If you are approved, not only do you get an immediate credit decision, an approval or decline, but if you are approved, we then issue a virtual card that today actually is not even a virtual card. It’s just provisioned directly into your wallet. And then you go on your shopping spree. And when you check out, you check out like every other person in the store by tapping. And this way, there’s no integration. You do this discreetly. There’s no training for in-store personnel. You know what your purchase power is before you even begin with this type of experience. And what we’ve essentially done on the backend is we’ve been able to create a platform that gives access to real-time financing when and where it matters most. We are quite selective with regard to the verticals, the industries, and the types of banks and lenders that we work with.
PR: Right. Well, there’s quite a bit to unpack here. So maybe we’ll start with what you just said there, the banks and the lenders. To take IKEA as an example, maybe the risk box for one particular lender is not going to be well suited for that particular buyer. How are you matching the credit box of the lender with the typical customer of the retailer?
YM: That’s an excellent question, and it touches on the model we chose to go after. You’re absolutely right. When you’re sitting at a juncture of finance, services or goods, and consumer, you have to decide who you’re really catering to. And obviously, we can say, well, we’re catering to all three, but that’s never true. You have a primary beneficiary. And we had to choose in terms of our go-to-market model, which ultimately impacted our product, our commercial model. Who are we catering to? For good or for bad, we are actually, first and foremost, serving the banks and the financial institutions. Our thesis is that these banks and financial institutions, especially the traditional ones, have tremendous experience in underwriting. They have a more efficient cost of capital because they’re sitting on all of our deposits, and they’re regulated, heavily regulated, which means that we know that their lending has to comply with all sorts of guidelines and legalities that are there in order to ensure that it is responsible. Where do banks and financial institutions fall short? They have a very hard time making these types of loan programs accessible to the end user, which can be a consumer or a small business, and definitely when this needs to take place outside of the four walls of the bank. Now, why do I give you this whole introduction? Because it really informed our product as well. The moment we understood who we were catering to, first and foremost, we understood that they were going to be the primary lender. If they decide that it’s right to bring in a secondary lender as a waterfall, so be it, but this is not a marketplace. So essentially what we do is we work very, very closely in very deep partnership with these banks and financial institutions. It’s all white labeled, and we build out their capability to make their various loan programs accessible to all sorts of outsiders. So, instead of bringing the customer to the bank, we actually, through our technology, bring the bank to the customer wherever the customer may be.
PR: Okay. So then, can you give us an example? Choose one of the banks you’re working with and explain how you’ve developed the program.
YM: Sure. So I guess it’s not a secret today that we work very closely with Citizens Bank. The interesting thing about them is that before we came about with our solutions and platform, they were already probably the market leader in the US. But one of the issues that they were struggling with was the time that it takes to set up one of these programs, onboard a new merchant, integrate with all of these systems, and customize it to the level that it really is catering to the specific types of journeys. Instead of focusing on what they do best, which is building the right type of loan program, pricing that loan program, measuring the risk, and controlling the risk, they all of a sudden had to engage in things that weren’t natural to their DNA and frankly to any bank’s DNA. You have to learn how to build a user journey on various types of e-commerce platforms, in various types of store settings, dealership settings, or clinics. And then, finally, you also have to get into the whole world of payment if you want to fund those transactions in real-time. And that was the value that we brought to them. So it allowed them to concentrate, exactly like you asked before, on figuring out which merchants and which service providers were best suited to them in terms of the audience that they were catering to, their risk appetite, the credit box that you spoke about before. But the implementation of all of this and the optimization of these types of experiences and onboarding they left to us. And that duo really created the ideal scenario.
PR: So then a Citizens Bank customer, there’s a certain set of merchants that they’re allowed to use their line of credit or whatever you want to call it. So it’s like a mini Afterpay in some ways or a mini Klarna. Is that thinking about it in the right way?
YM: So, let me start actually with your first comment. In all of these programs that we power today, including Citizens Bank, Citizens Bank is not selling only to Citizens Bank customers.
PR: Right. Okay.
YM: The program is built in a way where if you never banked with Citizens Bank in your life, but you came to one of the merchants or one of the brands or one of the retailers that they’re serving, you can apply. Now, obviously, that also allows banks and lenders to build up a relationship. And if they have other services like checking and saving, they can migrate over. Those are the programs that we stand up. They need to really cater to the broad audience. Is this similar to Afterpay and Klarna? The answer is yes and no. On the one hand, categorically, you can speak about this as Buy Now, Pay Later. It’s not really a term that ever resonated with us because BNPL is usually associated with smaller types of loans, shorter duration, and not regulated. As opposed to the vast majority of the loan programs that we power, where we’re speaking about regulated loans that are being provided by large financial institutions for longer durations. They’re really looking at larger AOVs, larger averages. And that’s really where we find that we bring value.
PR: Okay. So what’s an average order size that you guys are running through?
YM: Yeah. So it’s extremely vertical dependent. We usually go anywhere from around $800 to $900 up to tens of thousands of dollars. Usually, in the unsecured, we don’t reach six digits, but we can go pretty high depending on, of course, the loan program that is being offered. When I say we, we do not underwrite. We do not take the risk, but the banks and financial institutions that we work with around the world quite deeply are the ones who are taking on that risk and performing the underwriting. We are really providing all of the means to distribute and to fund.
PR: Gotcha. Okay. Maybe you can talk about the lessons you’ve learned. Citizens Bank is a pretty large bank. You have others that you’ve been working with that are also large. What lessons have you learned from building out these partnerships with medium to large banks?
YM: I would say, first and foremost, this is fundamental learning that is probably true not only for our industry but also for these types of partnerships. And that is that relationships, trust, and loyalty trump all. It is impossible to describe the value of building trust, which often allows you to overcome many obstacles. You could be providing the greatest solution in the world, but if there isn’t a deep sense of trust, especially in industries where we are providing critical infrastructure. If there isn’t that foundation of trust and real partnership, then the longevity of those partnerships tends to be challenged. And I can tell you that the relationships, both on an organizational level and on a personal level as well, have been absolutely hands down the most valuable thing that we’ve developed with many of our partners. We know this because they’ve said it to us. We know this because they tell us that this is what allows them, and they have, obviously, many partners, this is what allows them to sleep at night. When we are at the helm, they know that if we find any obstacle or challenge, we will not rest until we overcome it. They understand our sense of commitment. So, I would say, look to develop those types of relationships as opposed to a one and done.
PR: That’s probably going to be a part of my next question here, and that is regarding the regulatory focus that bank fintech partnerships have had. You’re not a typical BaaS provider. You have a bit of a unique angle here, but some of the regulators might lump you in as a fintech looking to partner with a bank, causing higher risk for that bank. Could you talk about the things that have happened this year in the bank fintech partnership space? How has that impacted your bank relationships, or has it?
YM: You’re absolutely right in describing the fact that we often need to clarify where we sit and what we do or, more specifically, what we don’t do.
PR: Right.
YM: And you’re right. We, at the beginning, sometimes get lumped in. I think today, there is a larger category of enablers like ourselves, but definitely, over the last few years, we’ve had many times, sometimes even on an operational level, when we were launching certain programs where we needed to alert the regulator and let them know that we were doing XYZ in a certain way and not taking any of the risks or not holding any of the funds. But once we did, it was very interesting. I’ve actually had multiple sessions with various regulators around the world who were looking to speak to us in order to understand our view, especially since we work with many of the regulated entities and, in many ways, empower them to compete with the fintechs who are taking on kind of a risk or lending position. If I may say, I always felt that once we explained our position, not only did the regulators sigh a sigh of relief, but many times they expressed the fact that this, from their perspective, is the more ideal partnership, where we understand the strengths and the stability of the financial institutions, and we come to turbocharge their ability to deliver with the right type of technology, as opposed to trying to switch them out altogether, even, I would say, undermine their position in the market.
PR: Right. Right. Okay. That makes sense. Let’s get into the weeds a little bit. I want to talk about digital wallets. And I read about your new Tap Now Pay Later technology, is I think how you’ve described it. Explain what that is and why it’s important.
YM: Sure. So in terms of the wallet technology, obviously, we didn’t invent wallets, but what we have been able to do actually early on before wallet was such a popular term was to understand that if indeed we’re able to take the funding for a loan and streamline it through existing methods of payments such as card, that cuts out, like I said, integration, training, and gives a user experience that is much, much more seamless. Now, of course, in recent years, when wallets just became absolutely a given, that really allowed us to double down on the technology we developed a bunch of years ago when we already realized we could put it on a virtual card. Now we can provision it to your wallet, and everybody understands what we’re talking about. Tap Now Pay Later is actually not a new technology, but it definitely has become the most popular way of distributing these types of products and immediately makes it clear to all of the parties as to what is actually going on here. There’s a funder or a lender, but all of those funds can be utilized and accessed through the wallet.
PR: So you’re working with the Apple wallet and the Android wallet?
YM: Those are the primary ones, yeah.
PR: What does it look like when you’ve got it in your wallet? Does it say Citizens Bank?
YM: Yeah. It really does depend on the underlying loan program. Today at Jifiti, we actually support many, many different types of loan programs. They can be a split pay, an installment loan, a revolving line of credit, or a deferred payment, for example, for small businesses, B2B, BSE, secured and unsecured. The beauty of the whole card and, in this case, wallet industry is that you have many, many different versions or tastes of what it is that you can produce. So it can be a card that looks like any other credit card for a revolving line of credit because it’s meant to be utilized that way, but it can also be a one-time use. In that case, all of the branding and graphics will absolutely convey what type of use you can put it to, and it sits there in your wallet conveniently.
PR: You could also do an installment loan with this wallet technology?
YM: Yeah, essentially, if you think about an installment loan, what you’re basically doing is you’re making one large payment, and you’re repaying it over time. That one large payment can be facilitated, and is facilitated today in many of the programs that we power, through a wallet transaction, simply because it allows you to streamline the entire process and avoid any type of training or integration for any of the parties.
PR: Gotcha. Interesting. Maybe just talk a little bit about your geographic footprint. What countries are you operating in and what scale are you guys at?
YM: So we today operate in 12 countries. We operate in the US and in Canada. We have a small operation in Mexico, but the vast majority of the remaining countries are in Western and Central Europe. And really what that meant, and this is quite unusual, definitely for a company of our size, but in this industry as well, normally you’re building out this type of infrastructure that takes into account a very, very specific market with its own set of rules and regulations. We understood that if we were going to start working with global brands and banks, we needed to be able to give them a uniform experience and almost a uniform build. However, you can’t really build a uniform build because of the different regimes and the different guidelines. Therefore, we took a modular approach and built our system in a way that with deep understanding, both on the legal side and on the financial side, to understand how we can take those pieces and reassemble them in each market according to the guidelines and according to the rules. And that’s what we’ve done. With regard to scale, thankfully, we work with some of the largest banks and brands in the world. Without going into great detail, we are doing billions of dollars in facilitation for transactions. So transactional volume is what you reach after you go through the application volume and the approval volume. This is an actual transactional volume. And again, our real mission is not only to drive dollars and cents through the system but is really to show up when and where it matters most to the customer, enable them to make those types of larger decisions and transactions that often are life-changing and especially for a small business may allow the small business to thrive and flourish. And we want to make sure that the right type of financing product is accessible to them when they are at that point of making a decision.
PR: Okay. Last question, then. You’ve been in this industry for a while now, you’ve seen obviously a lot of evolution over the last decade. As you look maybe to another decade out, how do you think this will evolve? I mean, is embedded lending going to be more and more ubiquitous? Is this how any kind of retail experience is going to encompass it? I’d love to get a sense of what your vision is.
YM: My answer is a resounding yes. We are finding this not only with finance, but I definitely see this daily, finance is becoming more embedded, and it’s going to be further embedded in almost every type of transaction scenario you can imagine. If once upon a time, it was limited to point of sale in-store and then it went online, it is now going from B2C to B2B. You can think about these types of financial offerings embedded in accounting, invoicing, and procurement software. Anywhere where there’s a transaction to be made, instead of you having to pause, drop everything, and run to your bank, figure out your finances, come back, this is all becoming streamlined. And we’re finding this not only in lending and not only in finance. We’re finding this embeddedness, the ability to embed, developing in almost every area of our life. If I can turn my Waze on, and in Waze, I have my Spotify embedded because that is exactly what I’m probably looking for while I’m driving, that just gives you a taste of how prevalent embedding various services within other experiences is. And it’s no different with finance. It’s actually a whole lot more critical in the world of finance.
PR: Okay, we’ll have to leave it there, Yaacov. Really interesting stuff. What you’ve done has been quite impressive over the last few years. Thank you so much for coming on the show today.
YM: My pleasure. Thank you for having me.
PR: Point-of-sale financing has seen more innovation, I think, in the last decade than just about any other area of lending. Obviously, we have the BNPL providers. They’ve led the way by focusing on this seamless user experience, almost an invisible type of payment they have developed. And they’ve taken serious dollar volume that used to be put on credit cards, so banks have missed out. Now, if banks want to get some of that volume back, particularly for the higher dollar items, which is what they’d be most interested in, they can build the technology themselves, or they can partner with a company like Jifiti. Rather than take on a multi-year internal tech project, many of the larger banks have increasingly decided it is more efficient for them to partner. Anyway, that’s it for today’s show. If you enjoy these episodes, please go and leave a review on the podcast platform of your choice, and thanks so much for listening.