Buy Now Pay Later - how does it work and what happens behind the scenes? By Jiakai Guo, VP at Sound Point Capital Management

Konstantin Dubovitskiy
And today as a guest speaker we have Jikai Go, the vice president at Sound Point, Capsule Management. And this
episode we're going to talk about a very interesting subject that is becoming more popular, especially now that we
are apparently hitting the recession. We are going to talk about by now P Leader or generally the consumer credit
scheme of things, how it works, how the funds are being settled, how are the defaults handled, and so on and so
forth. So you guy, let's kick it off easily. Tell us more about yourself, your background in the payment space and a
little bit about SoundPoint Capital management and your position there, of course.
Jiakai Guo
Thanks Constantine. It's a pleasure to be here again. You know, my name is Chicago and I've been working as a
structured credit investor for nine years now. So my focus has always been in the, you know, in the consumer asset
backed credit space. You know, currently I work as a vice president of the investment team here at SoundPoint
Capital. SoundPoint is a global credit asset manager. You know, we'll look across the capital stack, you know, for
various opportunities in both the loan space as well as the, you know, the asset purchase space. So yeah.
Konstantin Dubovitskiy
That is a lovely. And we're going to go in depth into quite a few of those subjects. But I'll start with the defnition, let's
start with the defnition of what we're going to be covering which is buy now, pay later. So tell us about that
specifcally. Actually let's start with how you are involved in that sphere.
Jiakai Guo
Yeah, defnitely. I think, you know, buy now, pay later as an asset class has really became mainstream and popular
over in the last, I would say decade or so. You know, as I'm sure you know, many of you know, the companies that
you've heard, right. You know, there are the afrms, the Klarna, the after pays of the world and then the main product
that we're talking about here are essentially just instrument loans. So that will allow customers to break down, you
know, their relevant large ticket purchase of a certain item into, you know, between three to six different instruments,
you know, over in the course of anywhere between two to four months. Sometimes, you know, that could go, you
know, a little bit longer as well. So yeah, you know, many cases, you know, these products will have an interest on
top.
Jiakai Guo
Some cases they don't. Usually that depends on the underlying customer profle. Meaning as a borrower, when you
know, are looking at checking out, you know, with these sorts of loan offerings. Right. So typically these originators
will be underwriting you based on, you know, things such as Your FICO score, your credit history, your repay history,
your income record, all those sorts of information. So, yeah, understood.
Konstantin Dubovitskiy
In that case, let's dig into the fun part of it. The, the earnings in that asset class. As you said, you know, it became big
only about 10 years ago and only grew since then. And the recent news of DoorDash partnering with Klarna and
everyone saying, you know, the famous quote from the big shorts where there's a bubble where you have to fnance
your burrito is defnitely not a great sign. So let's talk that and specifcally the risk versus the reward, especially for
the plunders of such loans, especially if they're smaller loans. And let's start with the main question. Sometimes
when you make such a loan or well, you receive such a loan for a small amount, let's say 400 bucks, you're buying a
small TV, you can buy it over the next two months, potentially with no interest whatsoever.
Konstantin Dubovitskiy
How does it work for, you know, the capital issues? For me it sounds like they're just providing capital for two
months with nothing in return with a potential risk of a default. What happens there? What, what is the point?
Jiakai Guo
Yep, that's a great question. So I would say different originators and companies have different ways of making their
revenue. But then I think to generally summarize them, you know, the main thing that they get, I think, you know, or I
guess really the mainstream use case of the buy now pay are the traditional non interest paying products. So usually
these are only being qualifed to the most prime borrowers of the world. So you're looking at probably people that
with prime or even pristine credit histories, with zero delinquencies or default histories, people that have 720 FICOs
and even north of that. So basically when companies are getting their information, these guys are looking to buy a
product or so the companies are fghting for their businesses. So in this case they would typically charge very
minimal or even zero percent interest.
Jiakai Guo
And so the way that they're making money is essentially that they will be instead getting a merchant discount from
the actual vendors. So for example, if you are a customer that's trying to get $1,000 laptop, let's just say from Best
Buy and then company X provides you this option to do buy now, pay later, to really split that $1,000 payment into
four instruments into the next four months, then in reality, while the buy now pay later provider is still getting the full
repayment of that thousand dollars, they're actually getting like a slight merchant discount rate that they call from
the vendor. So basically they will only be for example paying maybe 900 or $950 back to the actual vendor that's
selling these merchandises. So okay, so that's the main way.
Konstantin Dubovitskiy
Yeah, essential like factoring and that count due to the fact they are essentially fronting the funds for the user. So
although they're expecting to get the thousand dollars in four months, they're issuing a thousand dollars to the
merchant, correct?
Jiakai Guo
That's exactly right. So that's the typical way of how they made money on these non interest paying products. But
obviously there's the more, you know, traditional products that look more so like a, you know, like an unsecure
consumer loan. Right. So basically on those products you will have an actual apr, you know, that will be disclosed to
the customers upon signing the contracts and then they would just be paying, you know, both of the principal and
the, you know, and the interest payment back together at the same time, you know, when they're making the
repayment.
Konstantin Dubovitskiy
Right, right. Okay, now at least I know why I'm paying nothing on those. And who makes money there? I'm at ease
now. And yeah, I'm going on record saying that my credit history is amazing, obviously. So let's talk about the
situation where the credit history might not be so great and specifcally the pulling of the data. So the main point
there is to reduce friction, make it as easy as possible for the user to actually buy something and then handle the
aftermath later. But at the same time, obviously, or credit issuers such as Klarna, the goal is to make sure that they're
not underwriting someone who is going to default in two months. So what happens there? Because you are only
providing your name and credit card information. That's it. How do they know? Let's ask that question. And how
much do they know?
Jiakai Guo
Right, yeah, that's all I think, you know, very valuable questions, you know, when it comes to, under, I guess, you know,
when it comes to understanding the underwriting of these underlying customers. Right. So basically the main
information that the originators are collecting here will probably be your contact information. So your name, your
address, which they're in turn basically used to do a quote unquote soft put of your credit score. So these things also
basically they will give the originators the high level credit score information for them to make a decision. But you
know, it won't actually show up in the actual individual credit history. So it wouldn't really impact your credit scores,
which I think, you know, is the valuable part of this process.
Jiakai Guo
And then, so I think depending on specifc, you know, companies that we're talking about here, you know, some of
them may also ask you for like, additional layers of information such as your income or your, you know, even like your
banking history in certain cases. So that. Right. You know, they'll have enough information to determine when it,
when it comes to the case that you don't really have as pristine of a credit score to underwrite you. So. Yeah, so, you
know, there are, you know, say, multiple layers or, you know, dimensions of information that they could use to judge
the, you know, the potential ability to repay of a customer as.
Konstantin Dubovitskiy
Long as they don't know. I don't even know what piece of information I want them to know, honestly. But okay, let's
pretend like they don't know much. And I'm glad to hear that if I buy a burrito through Florida or doordash, my credit
score is not going to be affected or at least not too much. All right, that was all being said. Going back to the
question on how to make money or how they are making money off of this, specifcally off the users who are not
paying any interest. You've mentioned the, you know, the $50 off of $1,000 goes to Klarna or some other provider like
that. They also have to process the networking fees or, well, they have to pay the networking fees because they are.
Or network fees. Excuse me, because they are the ones collecting the payments now.
Konstantin Dubovitskiy
So let's talk about the payment fow and where, you know, they lose a good chunk of money or who pays for the
actual card processing itself. So a user buys something, chooses to go through Buy now, pay later platform,
essentially, in my view. And again, please go more into depth or in depth because my understanding is very broad
and not specifc and I would like to change that. So in my understanding, the user essentially provides a sum of
money that they want to buy. They say that here's how long it's going to take me to pay it back. Klarna analyzes it.
Good to go. They issue the $950 to the merchants that is settled and essentially buy the contract to like factory,
where they buy the contract of the user to themselves for a small fee. Correct?
Jiakai Guo
Yes. That pretty much summarized the whole process here. Yeah. So you know, the whole process, the whole
transaction pretty much starts, you know, from when a customer is ready to check out on a vendor's webpage. And
then so usually right now I, you know, sometimes, or I'll probably say most of the times that these PML Options are
provided directly on the actual page. So for example, if you're buying, you know, let's just say on Best Buy or on, you
know, Apple, for example, if you're taking out like a, you know, let's just say if you're looking to buy an iPhone 16 here
and then basically right on the checkout page, you know, either a frm or Klarna, you know, might have been there as
an option that allows you to really provide your information.
Jiakai Guo
So basically right, you click on that, you choose your relevant buy now pay later provider on that page and then next
page usually you know, it will ask you for, you know, all the high level information like the contact information or
some cases like the, you know, the addresses, the, you know, like the payments, the banking connection, all those
sorts of things for the initial underwriting. And then once all that's been approved, then basically, you know, it will
take you next to like a disclosure page which provides like an overview of basically, you know, what this product is,
you know, what's the obligation to repay, you know, when are the payments due, how many installments are, you
know, this particular loan is broken down into what's the implied annual percentage interest rate, you know, if that
applies.
Jiakai Guo
And then basically right, you know, as a customer you're liable to rip through all that really understand the terms that
you're signing up for. And then I think usually it will try to summarize, you know, for you that, right, let's just say over
in the next four months you would need to pay, you know, let's say eight payments and every two weeks. And then,
so you know, they will try to break you or I guess, you know, break down the total amount that's due, each
instruments amount, you know, on the page for you. You're great to that.
Jiakai Guo
And then basically, you know, the fund will then be dispersed shortly into the, you know, the designated checking
account that you have, you know, apply or you know, in some, you know, in some cases like they will be directly paid
to the actual vendor or like the page that you're on. Right. So for example, in the example that were just in, you know,
that fund will be dispersed directly to Apple, you know, for the purchase of the iPhone. And then everything just goes
as usual. And then basically, you know, as when these instruments become due, then you know, the funds will be
swept directly from the, you know, the saved banking information. Yeah, gotcha.
Konstantin Dubovitskiy
Understood. All right, in that case let's talk about in that situation. Let's say that the user connected their bank
account and so let's say that we're pulling ACHS in this situation. Who is the one eating the cost? I'm assuming it
would be Klarna that had to eat the cost in both credit card processing and the ACH processing, correct?
Jiakai Guo
That is correct, yes. So usually, yeah, you can think of them as. Right. So you know, for example, if they're doing these
soft pulls off checks and basically they will need to pay the, you know, the credit bureaus, you know, for the actual,
you know, scoring fees. Right. And then on top of that, sometimes when they are, you know, depositing the money,
you know, to the vendor when they're processing the repayments, you know, from the customer's bank accounts,
they'll need to pay either the ach, you know, the clearinghouse, you know, expenses or, you know, I would say, you
know, for other types of transactions there could be different payment processing fees too.
Jiakai Guo
But in general, try to think of them as they will usually structure so that where I guess for a good product and a good
company in general, you should think of that the APRs, the interest rate that they're getting, as well as the merchant
discounts that they're getting should be good enough to generate a positive unit margin to cover any of its costs. But
then taking a step back, so I think usually these companies that we're talking about here, these Bina Pay later
providers are also active, I would say investors in the asset backed securities of the world. So usually they will be
taking out debts from for example, investment companies like US or banks in certain cases to fnance these
transactions. And then throughout these asset, you know, purchase programs or debt facilities that you know, that
are being fnanced, right.
Jiakai Guo
So they would generate an access return or you know, more directly right into like the asset purchase programs, they
could generate like a direct premium upon sale of these assets. So those are also the alternative ways of making
revenue for the companies.
Konstantin Dubovitskiy
I'm sure they're not losing money. They're absolutely. I'm just curious where exactly the losses are and who.
Obviously it's going to be the consumer at the end, but I was particularly curious about the network fees because I
think one of the frst episodes we had on this podcast was about the network fees and how they operate. So I was
just looking back to that conversation and people, if you have not heard of it, take a look at our episode with
Marshall Greenwald. Amazing interview with the founder of Ionia. That being said, let's talk about the default. I'm
just, ever since we started this conversation I'm non stop thinking of the movie the Big Short. I'm sure people are
familiar, we are catering to the fntech professionals. If not, take a look at it.
Konstantin Dubovitskiy
It's a lovely movie, especially applicable in the current day and age. But that one was focused on the mortgage
payments which are defnitely more important than burrito payments or payments on your iPhone. So the question is
what is the rough default rate on this asset class? And again, I understand that it's a very broad question. I'm looking
for a rough number like is it in the numbers of 0.01% or is it in numbers of 2%?
Jiakai Guo
Yeah, that's a great question. And by the way, thanks again for that shout out. I love the Big Short as well. Yeah, so I
think you know, when it comes to the default array, I think it largely varies and depends on the, you know, the actual
product offerings. Meaning. Right. You know, obviously, you know, it's all driven by how the companies are pricing the
risk. Meaning, you know, obviously I think going to the origination of a certain product, you know, you would
defnitely, you know, expect to have different sorts of repayment rates and default rates between you know, a
customer that's buying, let's just say $1,000 iPhone that's with like a 750,000 dol 50 fco versus another customer
that has a 600 fco. Right. Usually the payment pattern should be expected differently.
Jiakai Guo
And then so in general you can think of them as anywhere between, you know, I would say on the, on the more prime
stubs, you know, on the more quality stubs, right, where they're underwritten with a much higher fco. Those numbers
are probably looking at like a low single digit versus for the interest bearing products usually they bear a little bit
higher inherent risks. And then usually on those cases, you know, you're looking at more so of, you know, high single
digits to double digit. Wow. Default rates. Yes.
Konstantin Dubovitskiy
Holy shit. That is not the numbers I expected to hear. But that does make sense. And that is why the next question
that I had in mind was what happens at a default situation? So it's not like if you default on your house, where you
lose a house, you already bought a burrito, you ate that burrito, what are they going to do? What happens if I let's not
take burrito as an example. I just like that edge case. Let's take the iPhone as an example. I default on my payments
on the iPhone. No longer paying Them refuse to connect with the lender. What's the next step?
Jiakai Guo
Yeah, so I think just taking a quick step back, I feel like it's probably worth mentioning that. So in general, the buy
now pay laters seen as an unsecure quote, unquote consumer asset class. And then when we talk about unsecure
here, it pretty much means that the product itself is non recourse. Which means that when it actually becomes
default, they actually cannot, for example, try to take control of that iPhone that you just bought. That's just not how
it works. So basically as when you sign up the agreement with the originator, they pretty much agree to take on that
and they will adjust the risk based on the, you know, the price, which is the interest rate that they're charging. But
yeah, so you know, I would say because these are loans, so the customers do have obligation to repay here.
Jiakai Guo
So when they don't, I think companies usually have their own, you know, very specifc sets of collection policies. So
you know, you can expect something like, you know, I would say within like a week or so, you know, for the, you know,
like the actual due dates of the instruments, you will start receiving the automatic notifcations on your phone email
that you know, prompt you for, hey, you know, there's a payment due on this day you should look at or I guess, you
know, you should be prepared for making those payments.
Jiakai Guo
And then usually they have policies around, hey, you know, if that instrument hasn't been really made, you know, say
seven days after the, you know, the actual due day or 14 days a month after two months after they have different
sorts of notifcation system that they will use to basically try to push the customers to pay back. But then usually
right once after a certain day they will just charge off that, you know, that particular, you know, loan slash advance
off of their book and they would just dim it as non collectible. And in those cases, you know, the record does show
up usually on the customer's credit history, which will be a debt.
Konstantin Dubovitskiy
Interesting. Okay, let's talk about that. Let's talk about what happens when you default on your iPhone. You maintain
the iPhone. What happens to your credit history? How does it get pushed through? Since we're talking about soft
pools on the credit when underwriting someone assuming it's no longer soft when we're talking about defaults on
that something.
Jiakai Guo
Yeah, so think of it as during the initial underwriting they've already collected all the underlying personal information.
Your name, your addresses, certain cases, your text ID, SSNs. So usually when a default occurs Then those
information along with, you know, the actual delinquent slash defaulted amount will be reported, you know, to the
credit bureau. So basically. Right. You know, Equifax or FICO will be getting this information and they will be, you
know, refected, you know, in the actual payment history. So basically. So that pretty much means that. Right? So
yeah, you know, even though this is a pretty low cost, easy to use, unsecure product, but still there are all the
consequences to it, to the negative dents to it if the customer chooses not to repay.
Konstantin Dubovitskiy
That's actually an interesting part that I did not plan for us to cover today. But I want to dig into it just a little bit.
Couple of questions about it. The reporting to the fco, to the credit bureau. When the company sees the defaults
after, I don't know, 60 days of delinquency, they choose to write it off and then they, as you said, report to the credit
bureau. Why do I, I'm assuming that's not a requirement necessarily. Or is it a requirement? Did all the lenders just
come together and decide that, hey, we'll be cool with each other and just snitch on all the people who are not paying
their dues?
Jiakai Guo
Usually I would say there are indeed collections agencies. So that's like the ofcial name of the, you know, the team
of people where the companies that work on the, you know, like the tracings of these delinquent, you know,
receivables. And then, so yeah, so, you know, usually you can expect them that. Right. Even after certain days, you
know, those do try to make an effort to basically collect those money. Sometimes it's directly done by these actual
originators of the binocular products. It completely depends on like the business, you know, that they're running a
here. It could vary. Sometimes they have their own very well built out team, right. That could be like a large team and
like a full call center of people that's like actively calling, you know, customers for their repayments or other cases.
Jiakai Guo
You know, they could also choose to, you know, sell like, you know, these delinquent or defaulted loans at, you know,
let's just say prices of cents on the dollar. So they could just post them and then. Right. So. But then at those cases,
right. So it essentially becomes like, you know, these like, you know, debt settlement, you know, receivables in the
space. And then basically they went into like these very specifc collection agencies hand. And then those guys will
also be going after the customers for the repayments. But to be Clear. It's nonrecourse. So no, you know, they cannot
basically go for the iPhone that you bought or you know, that expensive Valentino dress that you just bought.
Konstantin Dubovitskiy
Right, of course. Well, for now I'm looking forward to the day when they are going to try to get the burrito out of my
tummy. Let's talk about it. So back to the question of reporting specifcally of the delinquents or the defaults on the
micro loan, all the unsecured. Is it a requirement or is it just a general agreement in the fntech space that they have
that they all chose to, you know, communicate with each other that hey, this customer did not pay me. I'm reporting it
due to the fact that I want you to tell me if one of your customers didn't repay you so they can't just bounce around
not paying anyone working in the system. The question is it a requirement or is it a general agreement within the.
Jiakai Guo
So yeah, I would say in general I think this is a pretty comprehensive process. Right. So because I think you know, the
bureau's buy it for quite a long time, you know, basically about adding the histories of the repayments of these buy
not pay later loans onto, you know, their own history. So I think, you know, fnally, I think starting from either later of
24, whether the beginning of 25, they started report, you know, reporting that I think, you know, this is a pretty mutual
benefcial process because. Right, right. These, these originators of the binance are actually relying on these bureau
reports, you know, to underwrite customers and like in return they basically contribute their repayment histories, you
know, to basically, you know, build a more comprehensive history on, you know, off the underlying customer.
Jiakai Guo
So I think all, you know, off that, you know, creates like a pretty reciprocal and mutual benefcial environment.
Konstantin Dubovitskiy
Okay, understood. So it's not a law that's just general agreements within the initiative which again, yeah, it does make
a lot of sense that it's mutually benefcial. Everyone participates in that. Good to know.
Jiakai Guo
All right.
Konstantin Dubovitskiy
I had another question in my mind. Oh, okay. The question is about the asset class or this as an asset class and your
specifc perspective on it. Where do you see it going the more we're going into the recession or just hard times in
general where middle lower class are struggling the most and where deals like between Klarna and Doordash are
even possible to happen. Where do you think the asset class is going? Do you think that the future of consumer
purchases or do you think that the Downfall of the American economy and society in general.
Jiakai Guo
Yeah, I think that's a really comprehensive question. I think not saying if it's, you know, good or bad, but I think
defnitely buying up a layer as a NASA class has been getting mainstream recognition for the last two to three years.
You know, you can probably see that from all the, you know, the public earning reports of the frm and these other
companies out there, right. So their origination have been, you know, doubling, if not tripling or even quadrupling in
some cases. And then so, you know, that clearly, you know, shows that or you know, really shows to the public the
market that there is a demand for this type of low cost product. And then I would say in addition to that, right.
Jiakai Guo
I mean, you know, it's really hard to predict where things are going to go, especially with all the risks and noises that's
been going on. But yeah, I think, you know, I mean, yeah, I mean, like, you know, with all these like, I guess, you know,
unstable situations of the tariffs, you know, we're just not sure if you know, the economy is actually going to get hit
with like another pretty serious infation wave. And then if so, I guess, you know, my personal view will be in short
term, you know, yeah, you know, it will probably drive up the spending of all the consumers regardless of which
particular income group they really come from. And then, you know, that will probably return, drive up the origination
volumes.
Jiakai Guo
But then as I guess, you know, really as of the performance of the, that, that volume, right. We just don't know. It
completely depends on basically how things are at that time.
Konstantin Dubovitskiy
Totally reasonable and totally fair. And so the question is mostly focused on whether or not we as listeners should
be focused on paying close attention to the news from this specifc industry and learn more about this asset class
as a potential prediction of where the future of consumer credit lies. Which consumer credit is kind of what is driving
the economy or okay for a good chunk of it at least. So should we be paying close attention to it or do you think that
this is not a big enough of an asset class to be representative of the U.S. Economy or the U.S. Economy's health?
Jiakai Guo
I think that's a very broad question and we should probably break down certain levels, right? So I mean, yeah, I think,
you know, just based on the volume right now, I think it's defnitely not as comparable as, you know, the more
mainstream asset classes like the mortgages, right, like either the residential mortgages or like the commercial
mortgages. But I guess you know, at the same time. Right. I think different indices, you know, they may track by now
pillar separately or sometimes they combine them with the, you know, with the total secure consumer long genre
slash category. So I think, yeah, I think, you know, just it in general has a pretty good indication of the underlying
consumer health in my opinion. Because. Yeah, because, you know. Right.
Jiakai Guo
Like when you're looking at the portfolio here, the average, you know, borrower profle that we're looking at here are
not the under, you know, are not the, you know, the underbanked subprime. So these are usually the near prime to the
prime customers. So you know, if you're seeing like a pretty bad dent of the performance, then usually. Right. You
know, these are in my opinion like the backbones of the US economy then yeah, it's usually pretty addictive.
Konstantin Dubovitskiy
That's exactly what I was looking for. Just your take on the situation and this as an S class last question here. I
promise essentially on the volumes, you've mentioned the volumes and I realized I have no clue what the volumes
are. Is it in billions or are we pushing trillions at this point?
Jiakai Guo
I think I actually don't have a number on top of my mind, I think. But the total origination, let's just say for 2024, are
defnitely in the hundreds of billions really across the world. I think if we're looking at U. S specifcally, it's probably
maybe at least a tenth of that. I would, I would bet. Because yeah, to this day US is like, you know, like it's probably
the top one market for this particular product.
Konstantin Dubovitskiy
I can see that happening. Yes, absolutely. Okay, so we're done about still low end of billions. Okay, understood. So
summary for people who are now thinking of using this as a, you know, potential indicator of where the country is
going, let's say that the origination volumes double, do you think? And that, that is I promise, the last question and I'll
ask on that subject. I'm just, I got very curious personally. Just FYI told the listeners that was not planned on putting
on the spot. If you think that those, if those volumes are doubling, if the origination volumes are doubling in 2025
compared to 2024, do you think that's like a major red fag, we're selling off all of our ETFs and shorting the market
or just staying cool and not worrying too much about this?
Jiakai Guo
Yeah, I think that's a really interesting one. My own view on that is it doesn't necessarily yeah. You know, if that case
happens, indeed, I wouldn't necessarily think of that as like a general red fag slash recession indicator. You know,
the other things to factor in here, I think just really until recently, right. Many of these, not only the buy now, pay later
originators and providers, but also just in tech companies in general, you know, start to see basically the valuation
and the enterprise value of the companies are getting back to where they were, you know, four or fve years ago. So
they're kind of fnally getting like a short breather after all the, you know, all the downfalls of valuation, you know,
since COVID So, you know, you defnitely start to see more activities going on.
Jiakai Guo
You know, companies have, you know, with much improved fnancial health, you know, are able to roll out more
campaigns, you know, what that's like, marketing campaigns or other sorts of partnership with the goal of basically
getting more volume and getting more recognized, you know, really within the, you know, like the public and the
mainstream population. And so with all that in mind. Right. I think, you know, yeah, I think, you know, I do experience
expect to see the, you know, like, you know, just like the overall origination to continue increasing over the next
couple years and then. Yeah, no, that doesn't necessarily suggest like a, you know, particular recession stash.
Konstantin Dubovitskiy
Fair enough, fair enough. Well, if it triples, I'll defnitely be so truthfully. All right, last, last question for a lot of those
companies and as you mentioned, you know, also a good indicator of the activities will be insect behaviors working
with where the origination happens, who receives the funds, what happens to the funds. A lot of that information is
not public due to the fact that, you know, a lot of those companies are not public. They don't have to report anything.
They do tend to create reports at the end of the year. But a lot of those reports don't contain specifc numbers or
some of the interesting, true, interesting numbers are just not as close because they don't have to. How would you
recommend people who are listening to this right now to keep an eye on this industry?
Konstantin Dubovitskiy
So let's say someone got interested in this like myself and want to keep an eye on the origination if they're the
quarterly report that's coming out somewhere or some sort of place where we could stay updated on those
numbers.
Jiakai Guo
Yeah, so I would say defnitely you should continue looking out for, you know, the publicly available information. So
for example, I think, you know, a frm, you know, as we're talking about here is a, you know, public trailing, you Know,
like a publicly traded company. So, you know, on a quarterly and annual basis, you know, they'll be rolling out reports
to really show not only their performance but also just in general their view of the, you know, of the industry as well
as the economy. Right. So those are generally pretty informational and you know, suggestive of the, you know, like
the recent situation in the market. And in addition to that, I think there are also much larger companies, you know,
like PayPal's or others, you know, that will roll out like general market insights every once in a while.
Jiakai Guo
So sometimes they will also mention about their own particular binocular or, you know, instrument products. So
those also be good reports to read.
Konstantin Dubovitskiy
Yeah, great points. In that case, we are getting to the rap question of this interview and the rep question is if you
could whisper something into the head of the entire population of the world about payments, what would be the one
thing you would teach them? And that's something that you don't just whisper into their heads. It's just something
that gets implanted into their heads. What's that piece of information that you would like them to know about the
payment space?
Jiakai Guo
That's actually really interesting. Really, really interesting. I think, you know, so from my view, I think open banking
APIs is defnitely one thing that I would teach everyone about because it's so important. Yeah. Of the, you know, like
the fnancial technology space and really all of the long stash advanced originators out there. Because really, you
know, with these APIs become more prevalent, companies are able to refer, really put the more granular transaction
and deposit information from all the banks which were usually private before, I would say the creation of these APIs.
So now they're able to really aggregate them.
Jiakai Guo
And then even better now I think with different sorts of big data and AI analytic tools, they were able to really
summarize these and try to come up with a path pattern to predict for the, you know, for the future repayments, the
future, you know, salary payments, the future spendings. And on top of that they get to really predict, you know, how,
you know, the customers could be, you know, performing, you know, to like a certain product slash repayment
schedule. So yeah, I think, you know, that that's just like such, you know, you know, such useful tool that really isn't
widely known by, you know, the public. So yeah, I would love to introduce.
Konstantin Dubovitskiy
That open banking API. Any specifc recommendation besides the visa that you mentioned?
Jiakai Guo
I think a company, you know, that's called Plaid is defnitely, you know, the leader within the space. And you know,
stripe is probably another case here.
Konstantin Dubovitskiy
100% stripe. Plaid. The pronunciation is different, but same company for some reason I call it plaid. Multiple people
call it late. I don't like it. I'll continue calling it plaids even if it is wrong. Will not be correcting myself here. Yeah, that's
a great call to action potential. My call to action is to circle back with Chikai and asking for any specifc publications
on A where we can track the course of action of the buy now, pay later industry. B open banking APIs. Some
specifcs there. Any references? And for you, my lovely listeners, take a look at the description of this episode.
Everything that I mentioned just now will be there in the links format. I'm not gonna be spelling anything out here. I
do not expect you to Google it. I would not. So I don't want you to go there.
Konstantin Dubovitskiy
Click the links. You'll fnd something useful there. And of course, Jikai's LinkedIn is gonna be there. So if you have
additional questions, should to him or to myself. And as always, have a lovely day. Wow. All right, great.