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Kafene raises $14M to offer buy now, pay later to the subprime consumer – TechCrunch

With more and more consumers looking for alternatives to credit cards to fund their purchases, enthusiastic fans of “buy now and pay later” go nowhere.

And these purchases aren’t limited to luxury items such as Peloton (ahem, Affirm) and jewelry that someone might be dealing with themselves online. New fintech companies are trying to help consumers finance high-value products that are considered “need to have” rather than “good to have.” And to move forward towards that goal, we raised $ 14 million in Series A funding.

Neal Desai (former CFO of Octane Lending) and James Schuler (participating in Y Combinator’s accelerator program as high school students) were founded in New York City. Cafe Ne The pair’s goal is to promote financial inclusion by meeting the needs of what is described as “consumers left behind by traditional lenders.”

Specifically, Kafene will allow consumers with a credit score of less than 650 to purchase retail products such as furniture, appliances, and electronics using the Buy Now and Pay Later (BNPL) model. The focus is on helping. Think of it as a “subprime affirmation,” says Desai.

Global Founders Capital and Third Prime Ventures co-led the round, with participation from Valar, Company.co, Hermann Capital, Gaingels, Republic Labs, Uncorrelated Ventures and FJ labs.

“Historically, if you have access to credit, you can go to the bank or use your credit card,” Third Prime’s Wes Burton told TechCrunch. “But if you have unexpected expenses and your bank payments are delayed, you can have an impact and fall into debt hell.”

Kafene’s “flexible ownership” model is designed to prevent this from happening to consumers. If for some reason someone has to confiscate the payment, Kafene will come to pick up the item and the customer will no longer be obliged to pay.

The mechanism is that Kafene buys the product from the merchant on behalf of the consumer and rents it for 12 months. If they make all the payments, they own the item. If they create them early, they get a “significant” discount, and if they can’t, Kafene will get the item back and receive a bad debt loss.

Image credit: Cafe Ne

Desai believes this is a modern interpretation of the Rent-A-Center and charges more for inferior products.

“It’s a better product than a credit card, and its market size is huge,” says Burton. “We want to capture most of our credit card business in time, giving consumers the flexibility to quit and fly freely when they need it.”

According to Kafene, this flexibility helps facilitate financial inclusion by giving a wider range of consumers different forms of credit options in point-of-sale (POS).

According to Desai, this also helps to increase people’s credibility. If you buy a loan earlier than the 12-month period, Kafene will report them as positive payers, which will increase your creditworthiness.

“If they don’t steal items, their credit score will improve,” he said. “Even if you don’t have the money to return it. In the long run, they can get better credit to qualify for traditional loan products.”

Kafene released a beta version of its finance product in December 2019, but had to suspend it in March due to a pandemic of COVID-19. The company effectively “paused” from March to June 2020 and resumed its beta in July last year.

By October, Kafene had suspended all retail registrations due to increased demand available. As of March 2021, the company handled about $ 2 million a month in merchandise.

With the new capital, Kafene plans to significantly expand its existing lease-to-owner finance business nationwide and launch a virtual lease card for consumers.

Kafene raises $14M to offer buy now, pay later to the subprime consumer – TechCrunch Source link Kafene raises $14M to offer buy now, pay later to the subprime consumer – TechCrunch

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