Exclusive: ‘2020: Entering a new dimension’ – Paul Harrald, Curve in “The Paytech Magazine”
Curve’s timewarping technology has already given account holders a unique way to manage their personal cash flow. The startup’s latest tool further expands the financial management universe. Head of Curve Credit, Paul Harrald, explains why it’s boldly going into lending…
With the global pandemic playing havoc with people’s financial stability and employment status, and buy now, pay later (BNPL) credit models such as Klarna, Clearpay and Laybuy coming under fire for pushing people into long-term debt, the issue of responsible lending has never been more pressing.
Technology has made consumer lending incredibly slick. Customers enjoy near-instant credit checks facilitated by a diverse range of data feeds, including those powered by open banking connections. The rise of BNPL payment options at website checkouts also means it can now take just one click to make a purchase.
BNPL apps are a preferred payment method for online shoppers worldwide. More than 85 million users in 17 countries are clicking on Klarna alone. But consumers may not always appreciate the distinction between buying and borrowing in this blurred reality, and that’s where the possibility of taking on unaffordable debt arises.
Now Curve, the London-based fintech that consolidates multiple cards and accounts into one digital card and app, is attempting to set ‘the gold standard in responsible borrowing and lending’. Using its unique ‘back in time’ function, customers can choose to switch any transaction made on any connected card at any merchant, at any time, into a Curve Credit instalment plan in a single app.
Curve Credit has been designed to simplify the borrowing experience to ensure that consumers do not burden themselves with debts they cannot afford to repay. Curve will tell them if they’re building up too much credit and let them know if it thinks their next splurge is a bad idea, much like any other deferred payment scheme. The key difference, however, is that it’s the customer’s Curve account that is extending the credit (currently financed from Curve’s own balance sheet) and there is no pressured point-of-sale decision presented by a BNPL lender. Also, unlike other BNPL finance tools, Curve doesn’t require merchants to directly support Curve Credit as a payment option at the checkout.
Credit has been getting some negative press lately, but for head of Curve Credit, Paul Harrald, consumer lending is almost always a force for good and ‘an astonishing enabler’. Done well, he says, lending holds unambiguous value for society, but irresponsible lending or borrowing decisions do not.
“If I were to level any criticism at credit cards, it would be that people can accumulate debt, whereas what they thought they were doing was just transacting and buying things.
“I think there has to be a limit to the ease with which credit can be taken out – almost an artificial limit – because it needs to be undertaken thoughtfully, in my opinion.
“That doesn’t mean there should be an onerous burden and lots of agonising about credit. Credit is almost universally good for people. It leaves them with the flexibility to meet unexpected needs, it smooths their cash flow, it allows them to purchase more durable items, rather than less durable items, and for people on modest means, it makes their life less expensive, not more expensive.
“All of those are good borrowing decisions, it seems to me; the idea that you buy a better quality item, rather than a cheaper one, because you can afford it on credit. Let’s be clear, credit buys most people houses.”
Curve’s new credit option is enabled by the startup’s ‘go back in time’ technology, which lets customers retrospectively change the bank account or card they’ve used for a transaction. Instead of Curve switching a recent payment from their current account to their credit card, for example, it is re-routed to Curve Credit, where they are presented with a repayment plan and any interest they’ll be charged.
Right now, when consumers are facing a financial hit from the global pandemic, the ability to change their minds (up to 90 days from the moment of purchase) about which account they want to take the money from – or, indeed, whether they want to convert it to an instalment plan – may prove invaluable.
A Timely Solution
Coronavirus has put millions of British households under pressure. In September, research by leading debt charity StepChange found that household borrowing and arrears linked to the pandemic have soared 66 per cent since May, to £10.3billion. The number of people who are in severe debt has risen to
1.2 million – nearly doubling since March – with a further three million people at risk of falling into long-term debt problems.
Harrald doesn’t buy into criticism that people are being lured into borrowing. They are generally smarter than that, he says, if the lender behaves responsibly.
“Larger borrowing decisions, or accumulation of borrowing, should be thoughtfully done. The way to do that is not complexity; the way to do that is to create a simple enough borrowing experience, that the consequences of a person’s borrowing decision are crystal clear. The way Curve Credit will approach this is that users will always be asked to review the effects of their potential borrowing decision. Curve Credit will look at their current situation, it’ll look at what they’re committing to Curve Credit on a monthly basis and they’ll be afforded the opportunity to carefully consider that.”
The lending industry is getting better at running affordability checks, yet lenders remain largely poor at spotting vulnerability, because it is difficult. As Curve arguably has a much clearer picture of a user’s transaction history than a single bank or credit lender, it is able to augment traditional credit scores with its own data.
Harrald indicates that it was almost inevitable that Curve would enter the short-term loan environment.
“We have a beautiful user experience and we have beautiful payments technology, which means that it would be remiss of us not to provide a lending experience like this. Curve sits directly at the nexus between payments and borrowing, just like credit cards do.
“To me, the argument to create this system was overwhelmingly obvious, to a student of fintech, to anyone who’s been a lender, and anyone who’s a student of business lending models. I don’t need the success of Afterpay and Klarna, and others, to tell me this is a good idea.”
It’s also inevitable that, at some point, Curve will need to start generating serious revenue. In August, it was reported that the business was seeking to secure between £100million and £120million in a Series C funding round, which would build on the £44million raised by the business in 2019.
When Curve Credit was announced earlier this year, it was suggested that Curve planned to build a marketplace model, giving access to multiple lenders, but its immediate future lies in the ‘relatively simple world of closed-end instalment loans’, says Harrald.
“We could be a broker. Curve could go out to multiple lenders, saying ‘hey, we’ve got access to customers. Do you want to sell your loans through us?’. We could be a peer-to-peer lender quite easily – the future of Curve, as a platform, is unbounded.
“But lending generates revenues, and it is true that it’s increasingly difficult to raise venture capital funds, or private equity funds, without revenues. People want to see revenue. So, Curve Credit is not just an inevitable next step; it’s also proving the revenue generating possibilities of Curve in the most direct way.
“Curve is an unashamedly commercial enterprise. At some point, it needs to continue to increase its revenues, and credit is a complementary addition to other revenue sources, lending is a natural way to do that,” says Harrald. “So, Curve will expand its products, it will expand its geography and, ultimately, be this nexus between content creators. The future of Curve, as a platform, is unbounded.”