Gone in 60 seconds: How Sunbit is revolutionizing point-of-sale financing
Point-of-sale (POS) financing in the U.S. is a massive industry. POS financing is defined as providing financing at the point-of-sale for large consumer purchases. Filene Research Institute estimated the annual size of the POS financing market at $391 billion, or approximately 3.5% of annual U.S. consumer spending in goods and services.
According to The Economist: “Driven, in part, by younger consumers, POS financing is becoming increasingly popular in America. Consumers who might previously have financed purchases such as furniture, electronics or home-improvement projects with a credit card are now opting to borrow at checkout.”
While there has been significant innovation in digital POS financing solutions that has led to the emergence of a few billion dollar companies, there has been a lack of focus on physical POS, even though the total addressable market exceeds that of digital POS. Currently, legacy players such as Synchrony Financial and Wells Fargo dominate the physical POS market despite using technology protocols from the 1980s (fax machines, to be specific). To add insult to injury, they only tend to provide loans to those with prime credit scores (a FICO score above 650), leaving those with a subprime credit score without any viable financing options.
A Blue Ocean Opportunity
The rumors of the death of in-store financing are grossly overstated. There are many industries that require in-person transactions. Customers will always need prescription glasses (a $9 billion market), their cars fixed (a $116 billion market) and their vet bills paid (a $17 billion market), all of which are in-person transactions.
The Filene Research Institute report also described POS financing as a “Blue Ocean” lending opportunity for credit unions. However, despite the massive opportunity, credit unions and banks elected to ignore POS financing almost completely. A 2019 study released by Cornerstone Advisors found that just 3% of banks and 12% of credit unions treated POS financing as a high priority in 2019.
Skeptics can argue that credit cards can (and were designed to be) used for large purchases at the POS. Customers tend to use credit cards for transactions that are often tied to fixed and repeated expenditures. If a large and unexpected expense is charged to a credit card and is not paid off right away, high interest charges can hit the next month which can heavily skew the cash-flow management for many Americans on a tight spending budget. In fact, according to the Federal Reserve, if faced with an unexpected expense of $400, four in ten Americans would not be able to cover it without selling a valuable possession or borrowing money.
Introducing Sunbit — A Physical Point-of-Sale Savior
The combination of these factors (a huge total addressable market, market need and product fit, lack of adequate solutions, plus legacy players who are decades behind) led to the creation of Sunbit in 2016.
Sunbit is a financial technology company that makes financing in-store purchases at the point-of-sale fast, fair and easy for consumers across the credit spectrum. A Sunbit application takes less than 30 seconds and requires nothing but a state-issued ID, a phone number and an email address. Once approved, consumers across the credit spectrum are given clear, fair rates for purchases up to $5,000 that can be split to 3, 6, or 12 payments.
For many, this is a better credit alternative to what is currently available. Sunbit also helps finance those with subprime credit who have historically been unable to get financing without incurring high fees or becoming a target of predatory payday loans.
Though it is common for fintechs to deploy machine learning when underwriting, Sunbit uniquely implements it across operations in customer service, push marketing and sales support. The company’s world class machine learning platform was developed by Professor Tamir Hazan, leader of the Machine Learning Data Lab at the Technion in Israel and widely regarded as one of the global leaders in machine learning research. This technology makes it possible to serve the underbanked, prime and everyone in between, often providing the best rates that these customers will ever be offered. With machine learning distributed throughout the organization, Sunbit is able to approve 90% of customers — the highest in the industry.
We began our involvement with Sunbit essentially from the company’s inception in 2016. We led their seed round and I also joined as a board member. Since then we have continuously funded the company in all subsequent financing rounds and maintained our position as the company’s largest investor.
A few months ago Sunbit was seeking significant capital for growth expansion. We introduced them to our dear friend and partner, Oren Zeev of Zeev Ventures. Oren, who has been a major backer of numerous category defining companies, immediately identified Sunbit’s potential to become a market leader in POS financing and decided to lead Sunbit’s $26 million Series B round in which we also participated in a meaningful way.
We are delighted to have Oren join Sunbit’s board and look forward to working together with him, Stuart Larkins at Chicago Ventures and the Sunbit team to help bring the company to its full potential. This latest investment brings Sunbit’s total equity raised to $54 million. This allows the company to accelerate the adoption of Sunbit across a wide range of brick-and-mortar retail outlets, such as automotive service centers, dental, eyewear, and veterinary services.
Sunbit has consistently grown by more than 15% month-over-month whilst scaling nationally into other verticals where their solution is much-needed. We believe this company is well-positioned to become a category-defining fintech company.
The Next Point of Sale Unicorn
In fact, allow me to make yet another bold prediction: Sunbit will become a unicorn within the next 36 months. There are a multitude of reasons for this:
- Sunbit is led by a stellar executive team with experience from some of the most respected companies across financial technology and retail (Arad Levertov, Tal Reisenfeld, Ornit Dweck-Maizel, Professor Tamir Hazan, and Eric Thaller).
- The company operates in an industry with a huge total addressable market with customers that are underserved.
- The POS market is heavily regulated and creates high barriers to entry for any other disruptor that intends to scale and operate nationally.
- Sunbit has perfect product-market fit. Their customers love their frictionless product and are approved for a loan within seconds.
Congratulations to the team for their latest accomplishment. We are excited for the next stage of Sunbit.