The original interview with Janko Medja, co-founder of our portfolio company Leanpay, was first published in Marketing Magazin. Leanpay is at the forefront the “traditional” financial service, payment in instalments, but the whole process, from identification and approval of the amount to the payment itself, is very fast, simple and transparent – as we expect from an advanced digital tool. The financial and technological company currently operates in the Slovenian market with the development team in Serbia. Despite the increasingly consolidated and mature banking market, it managed to “cut out” a niche that today serves tens of thousands of users and connects them with merchants and service providers. It helps thousands of people pay a significant purchase in instalments each month. It enables digital payment of instalment payments through various sales channels (both online and physical) and offers consumers a simple, transparent and comprehensive financing process.
1. Paying in instalments doesn’t sound like something new; where is innovation “hidden” in your business model?
The business model is actually simple. Leanpay is a link between traders or service providers and consumers. Our instalment payment service is simple – the key is to reduce friction throughout the process to make it more friendly and transparent for everyone in the chain. It is a quick – and almost completely automated – check of an individual’s solvency to approve the amount and quick feedback to the individual. The consumer receives a product or service as soon as it qualifies for the Leanpay limit or when it has successfully passed our checkpoints. The same applies to the provider of a service or goods, who, after arranging for the identification of the buyer and the delivery or performance of the service, receives the full amount of the purchase price. The user then returns the instalment amounts to Leanpay according to the selected loan agreement in accordance with the concluded credit agreement. We also simplify other events in the purchase process, such as the return of goods or withdrawal from the purchase contract, and thus try to help the trader and the buyer.
2. Who exactly is your target group or key market segment that you are addressing?
When we look at Leanpay users, we find all types of people, from young to old, from all over Slovenia, with a wide range of financial capabilities and interests. It would be a mistake to assume that our key market is consumers who are not in the most enviable financial position and are overcoming difficult times with instalment payments. Of course, every credit system works selectively, which means that not everyone meets the conditions for financing. Prejudices can lie, numbers usually don’t. Data on the consumer power of our database show that the majority of customers are quite financially capable, with a healthy ratio between revenues and credit or other burdens. Our target group is adult, digitally literate consumers, ie smartphone users, with already established own revenues, who want to simplify the purchase process and have predictable monthly costs for larger purchases. Socio-demographically, on average, this means a slightly younger population, but our service is often used by retirees as well.
3. How do you address (potential) users and which points of contact have so far proved to be important?
No one needs credit, but they need what they buy. The fact is that people are not really focused so much on the financial resources that will make the purchase possible but on the object of the purchase itself, such as a bike, TV, or smartwatch. We buy the usability that this product will allow us, and by buying in instalments we get this utility, for example, a year earlier than if we were saving money to buy. The goal of Leanpay is to make this possible in the simplest way. We address the consumer together with retailers. Namely, they have the products that people want, and Leanpay simplifies the way to get them. With certain traders, we have e.g. agreed on an exclusive offer of certain products or truly special commercial terms. We believe in clear and transparent communication of the conditions and we hand them over to the buyer in the process of assessing the instalment payment.
An increasingly important aspect is also communication with existing Leanpay users, which in turn means increasing the value of the existing user base. Digital communication via various channels, such as e-mail, SMS messaging and remarketing on social media, predominates here. We follow the logic that we can only be successful if we are relevant. This means an emphasis on the personalization of communication, which will continue to be the main development trend in the future. We inform users about specific products in specific price frameworks for which our algorithms assess that they are suitable for their interests. Maybe that’s why we achieve very above-average effects on email campaigns, in terms of the open rate, click rate and conversion rate.
4. How do you see Leanpay in a broader, global financial-technological ecosystem? Can it seriously compete with giants like N26, Klarna, Apple Pay and others?
Viewed from a slightly (self-) critical distance, Leanpay is not really so much a revolution as an evolution in terms of bringing together the best of the “old” financial industry and the “new” digital ecosystem. We are aware that trust is key in managing any financial instrument. We work with both banks and SISBON, t. i. credit bureaus and these are institutions with established risk management mechanisms, with a tradition, with good integration into the entire financial system. In addition, Leanpay introduces a digitized approach, flexibility, low processing costs and the ability to adapt extremely quickly to the needs of consumers and providers of goods and services. For now, we are still integrated into the local environment, as Slovenia is our pilot market, but in parallel, we are already developing other, primarily European markets. If we develop according to plans, we will one day be comparable to some of those you have listed – but we do not necessarily view ourself as their direct competition.
5. How has the recent crisis affected the market, financial industry, and how has Leanpay been affected? How do you see the near future?
This year’s events are definitely a big shock. Unforeseen and large expenditures by countries to mitigate the crisis are increasing their indebtedness, shares of many companies, especially in the most affected industries such as tourism and passenger transport, have collapsed, there will also be consolidation and collapse of companies, while some services, e.g. video calls, become a critical infrastructure and thus influence the positive trend in the valuation of such companies. Retail, which is currently a key industry for Leanpay in terms of revenue, suffered a blow, but in some places, it also adapted quickly. The share of transactions made by users online, for example, jumped from a few percent to a hundred overnight, as there was virtually no alternative. Because people suddenly had a lot of new needs, such as e.g. arranging home offices, even during the crisis several of our trading partners worked very well.
I think that at the “opening” of the state/society we can expect that old habits will partially return and that people will therefore not just shop online. However, I am also quite convinced that some consumers have now realized that there are easier, simpler ways to do business and also shop, and that due to time savings, transparency, the comfort of a home armchair or favourable instalment payment conditions, many will continue with the new practice.
6. What do you think is the greatest value of a platform like Leanpay?
The basis is always the most concrete added value for individual stakeholders, e.g. convenience, convenience, individual offer, the security of purchase, ease of repurchase with one click for the consumer or regular promotion for the trader, which contributes to its greater sales. I also see the benefits in the ability to enter into mutually beneficial and long-term partnerships – with providers, financial organizations and others. In a short period of operation in Slovenia, we managed to connect over 150 retailers and several tens of thousands of users. We want to do the same in other, larger markets.
7. How do you see the competitive environment and how do you deal with it?
When we launched the platform – two years ago – we had a very clear unique advantage, ie digitalized instalment payments with a fast process. Within a year, some competitors had at least partially adjusted. But we believe in a constant cycle of incremental and sometimes major improvements on the one hand, and in the deepening of partnerships on the other. As a technology company and not a banking or financial service provider, we believe that we can do more than the competition by developing our processes, customer services, merchant services and partnerships with others faster.
8. How did you make the transition to the new industry, if we can call it that, since we know you best as the former first man of the largest bank in Slovenia? Is your previous experience an advantage or a hindrance in your new role?
Past knowledge can, of course, be both an advantage or an obstacle, depending on what you decide it to be. You have to use what’s useful and learn things anew in areas where you don’t know enough. Working with trading partners is to some extent new, but on the other hand, I have worked a lot with companies in my career. General knowledge of banking and finance is useful, but it is completely new to all of us how consumer lending trends are turning. Working in a startup is different from a large organization, to which you learn to adapt. But when we work with large retailers and other organizations, past experience certainly helps. It seems to me that effectively combining some current “traditional” skills with creating new approaches is a rare ability and it’s an area where I can best help my team.
Read the entire interview on Marketing Magazin. The article is in Slovenian language.