eBay is acquiring BillMeLater for $ 945 million… that is a healthy price… especially given current market conditions… what is the business model?
~~~~ ” The problem is people who can’t afford to pay for things are financing things. If you have the proper controls, you don’t allow that to happen.
We don’t grant credit limits. We grant credit on a transaction basis. If you are somebody who is not paying us, or running up your bills in other places, we don’t grant credit.
Traditional credit cards, in contrast, let you run up your bill up to a pre-determined credit limit. With each transaction, BillMeLater check your credit score, credit outsanding, status with credit agencies, and a few other criteria. And it either approves your credit or it doesn’t for each purchase in less than three seconds. Kwatinetz says that the company tightened its lending policies about a year ago, and claims that the nonpayment rate is “probably the lowest of anyone on the Web.”
The value of the company lies in its algorithms that determine credit risk and in its ability to use the Internet as a platform for granting credit. All of the data that its algorithms consider is pulled in via Web APIs from credit agencies and other data providers.
For eBay, Bill Me Later will help expand its Paypal franchise to consumer credit. Bill Me Later is already used all over the Web by more than four million customers at places like Amazon, the Apple Store, JetBlue, and Walmart,com. This year the company is expected to finance $1 billion worth of online purchases and bring in $125 million in revenues. Revenues are estimated to be $150 million in 2009 (a 20 percent growth rate), but the acquisition will also be dilutive to eBay’s earnings, meaning the business is not yet profitable on a net income basis.” ~~~~
OK… the lending space starts to look a little more like the securities trading space… real time data exchange and algos using real time inputs… it’s deeply ironic that this comes today as the traditional credit system writhes in it’s agony… maybe the agony is the birth pains of creative destruction making way for new methods and systems… birth and death are messy processes … indeed….
Post a Comment