Major renovations that cost thousands of dollars typically aren’t impulse purchases. But the home-improvement industry still welcomes the speed and ease that made buy now/pay later loans popular.
The U.S. home improvement industry will reach $600 billion by 2025, according to Statista. Bigger costs come with bigger risks, which in turn add friction to the process of applying for financing. But as BNPL lending gradually revolutionizes consumer financing, the opportunity for BNPL specialists to cut into traditional private-label credit card home-improvement financing — including through big-box merchants like Home Depot and Lowe’s — is huge, according to observers.
Although the credit card industry hasn’t registered a hit from BNPL loan growth, U.S. consumer data shows that alternative financing vehicles have momentum, said Jason Barro, a partner at Bain & Co. and founder of NPS Prism, a three-year-old benchmarking platform that uses broad consumer datasets to score how companies perform in various marketplaces.
Since the start of the pandemic, the share of U.S. consumers who said they didn’t have a preferred top-of-wallet card was 9.2%. Over the next three years, as BNPL lending surged in popularity, the share of consumers not loyal to any credit card rose steadily, reaching 15.3% by June 2022.
Capitalizing on that trend, HomeAdvisor, a division of Angi Inc., last year partnered with Affirm to extend the BNPL model to home-improvement projects ranging from minor home maintenance to major remodels. Its approach requires users to fill out a short application — longer than a typical online BNPL loan — with live customer support available to help users navigate steps from finding a professional to getting an estimate and finalizing a loan.
Wisetack, a San Francisco-based startup, is another player in the BNPL home-improvement lending arena that aims to build scale by forming deep partnerships with platforms serving industry-specific verticals. Its focus is on big-ticket purchases that go as high as $10,000 and up.
“If I own a plumbing business, I need to have a path where consumers can find me and get the equivalent of an instant, nearly seamless BNPL loan,” said Bobby Tzekin, Wisetack’s co-founder and CEO.
Typically, a home-improvement services provider routes customers to a third-party lender to seek financing. By contrast, Wisetack integrates its BNPL loans offers and approvals directly into any service provider’s platform.
Wisetack has worked with Housecall Pro, Quik and Mobile Tech RX to extend BNPL loans to independent electricians, plumbers and heating and air-conditioning providers. Its process ensures end users stay on the original platform where they connect with a professional, agree on an estimate and choose financing.
In August, Wisetack became the financing arm for Thumbtack, a home-services website enabling users to search for, rate and hire local vendors to work on everything from home-improvement projects to legal services and event planning.
Tzekin, who has years of experience working in consumer payments — including seven years at PayPal in merchant solutions and stints at YapStone and Lending Club, where he was vice president of product — said Wisetack’s goal was to keep the loan approval and management closely tied to the project to better manage risk.
“We’ve built a process to streamline the flow of getting an estimate and approving a loan that even includes ways to easily make changes in the scope of work during the project,” Tzekin said.
Hatch Bank, based in San Marcos, California, is Wisetack’s partner to underwrite and secure loans; it sells receivables from loans to third-party credit buyers, Tzekin said. Wisetack works with platform partners to charge merchants a fee for closing deals; the fee varies based on the scope and risk of the project.
“We measure risk for each project in real time, with data that tells us who borrowers are and what they’re borrowing for, so we can price each loan appropriately,” Tzekin said.
Wisetack raised $45 million in Series B funding in 2021, bringing its total to $64 million since the company’s launch in 2018.
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