Twisto Takes BNPL Playbook To Cash-Heavy Eastern Europe
Michal Smida is on a mission. As the 33-year-old CEO of Twisto, a Prague-based payments startup focused on buy now, pay later (BNPL), he’s looking to challenge the status quo and change long-standing perceptions about the use of credit in a part of the world where cash is still dominant. To achieve this goal, Smida says he didn’t try to reinvent the wheel — he simply followed the example of sector leaders, such as Klarna, Affirm and Afterpay, and took it to a place where it wasn’t being used, or at least not being used well.
“In central and Eastern Europe, you have very low credit penetration and utilization,” he said, noting the deeply rooted belief that lending is bad, and that if you don’t have the money, you shouldn’t buy it. “There’s just a bit of a stigma around credit. It’s okay to take out a mortgage, but it’s not okay to buy new Nike shoes and pay for them in three installments,” he said. “So we’re challenging that notion with a much better product than what is in the market and is much more transparent.”
It’s an uphill battle, but in the seven years Smida has overseen Twisto, he has added 1.6 million customers and is now also doing business in Poland and planning on doing business soon in Romania too. The three countries have a combined population of about 70 million people. That growth — and opportunity — have also caught the eye of investors like Zip Money, which has just taken a stake in Twisto to help drive its growth plans throughout the region.
Bringing Something New
Smida said Twisto’s purpose is not so much about replacing credit as it is about re-educating consumers and creating a new market with a new instrument that is mobile, transparent and easy to understand.
“From a consumer experience, a lot of the [legacy banking] players are still in the Stone Age,” he said, in terms of a fully digital solution that is easy to control in an app and also can be used to pay bills. “That’s just not in the market today.”
Although the former Barclay’s banker founded Twisto in 2013, fate would have it that the pandemic has proven — in hindsight — to be a major catalyst for growth. But in the beginning, he had his doubts. The company didn’t know how customers would behave. It didn’t even know if customers would pay on time.
The answer, he would soon learn, was yes. Twisto has seen some of the lowest NPL (nonperforming loans) levels and risk costs in its history, “meaning people were actually paying their bills on time and at a rate that we had never seen before,” he said. “So for us, that was a strong indication that we are targeting a very healthy segment of [the] population.”
The second COVID-related boost has been the general digital shift that has led to increased online commerce around the globe.
“A lot of customers before [COVID] did not buy much online,” he said, “but there was a huge shift into eCommerce payments and eCommerce shopping, and buy now, pay later provided a great way for some of those [consumers] to buy bigger things than they otherwise would and just be afraid to buy. Buy now, pay later reduces that fear.”
Evolving And Changing Focus
Just like individual consumers, Twisto itself has evolved and adapted to changing market forces. It has evolved from a pure buy now, pay later provider into a full-fledged wallet. While the company had been focused on direct-to-consumer the past two or three years, Smida said over the past six to eight months, it has been focusing on customer acquisition through big merchants and leveraging its relationship with Zip Money. Twisto has also been drawn to the fast growth of the food and grocery delivery business, which has grown two or three times over the past 12 months he said and has become the company’s biggest driver of growth.
“So we’re moving into the FMCG [fast moving consumer goods] sector or eCommerce, more than the traditional, buy a new fridge or buy a new TV, which we’re seeing less of.”
Weighing Risk, Eyeing Acquisitions
Smida says he is a mix of optimism and opportunism.
“I think for us, the biggest question is around how much risk we want to take. Not only in terms of growing the number of clients, but also looking at expansion opportunities,” he said of the year ahead. “There are a couple of players that we see that are smaller and regional players, and we see some M&A [mergers and acquisitions] opportunities in the market, which obviously can bring a lot of reward, but also higher risk.”
As far as organic growth, he said Twisto will continue to pursue underserved local markets and look to gradually expand into other central and Eastern European countries like Turkey and even Russia.
“If you look at Klarna’s branding or Zip Money or AfterPay, we unfortunately haven’t come up with something smarter or better than what they have, so we tried to apply something very similar because we also target a very similar audience,” he said.