IKEA operator invests in Israeli ‘buy now, pay later’ fintech firm

Ingka Group, which owns 389 IKEA stores and e-commerce operations in 32 countries, acquires minority stake in Jifiti

Ricky Ben-David is a Times of Israel editor and reporter

A branch of the furniture chain Ikea in Wallau near Wiesbaden, Germany, March 17, 2020. (Frank Rumpenhorst/dpa via AP)
A branch of the furniture chain Ikea in Wallau near Wiesbaden, Germany, March 17, 2020. (Frank Rumpenhorst/dpa via AP)

A major IKEA owner and operator has invested $22.5 million in Israeli fintech (financial tech) company Jifiti, a developer of consumer financing solutions for banks and lenders, the firms announced on Tuesday.

Ingka Investments, the investment arm of Ingka Group, which owns 389 IKEA stores and e-commerce operations in 32 countries, provided the funding for a minority stake in Jifiti.

Founded in 2012 in Modiin, Jifiti started off by creating a point-of-sale platform for merchants in the retail space, enabling them to deploy digital solutions such as gift cards and gift registries. Two years, the company added a new tool that offers buy now, pay later (BNPL) financing options both in-store and online.

BNPL is a fast-growing fintech solution that allows consumers to make immediate purchases and pay for them over time. It is especially popular with younger shoppers and has caught on quickly since the onset of the COVID-19 pandemic due to increased digitization, merchants expanding their e-commerce offerings, and consumers buying more.

Among the leading players currently in the BNPL space are Affirm, a San-Francisco-based company established by a PayPal co-founder that just announced a major partnership with Amazon this week (sending shares soaring), Australian firm AfterPay, and Sweden-based Klarna. They offer a variety of payment options under different terms and rates directly to shoppers, and some conduct soft credit inquiries or background checks.

These companies have been able to move quickly and integrate with merchants, said Shaul Weisband, Jifiti co-founder and CMO, “but they are also the lenders.” And this is where Jifity saw a gap.

With the market for BNPL companies expected to grow “10-15x by 2025 to eventually process $650 billion-$1 trillion in transactions,” according to the Bank of America, “banks have been losing market shares because they don’t necessarily have the technology to work with merchants,” Weisband told The Times of Israel ahead of the investment announcement.

Jifiti founders from right to left: Yaacov Martin, CEO; Meir Dudai, CTO; Shaul Weisband, CMO. (Courtesy)

“What we are doing is giving banks the technology they need to scale and streamline loans directly,” he explained. With Jifiti, banks can deploy competitive consumer loan programs at the point of sale online and in-store with any merchant, Weisband said. And so can the merchants themselves.

The BNPL concept may seem vaguely familiar to Israelis who have been using payment installments, known in Hebrew as tashlumim, to make purchases for many years. “Tashlumim is based on existing credit lines through credit card companies. What BNPL does is create a new line of credit not linked to credit cards,” he said.

Israel is also currently not the target marker for Jifiti. Europe and the US are, said Weisband.

The company has already been working with leading financial institutions such as Mastercard, Citizens Bank, CaixaBank, and Crédit Agricole, and retailers like IKEA and Walmart.

“We are giving them more tools, more ways to integrate technology. For consumers, items become more affordable. For merchants, they see the average order value go up and more transactions.”

“With IKEA, for example, they work in 32 countries, it would be inefficient for them to start working with 32 different local lenders” subject to different terms and regulations, Weisband said. “With us, they can deploy a fully branded loan program for their consumers.”

And IKEA already does. The retail giant has been working with Jifiti since 2019, offering financing in IKEA stores in Spain, France, Portugal and Belgium with local banking partners.

Israelis wait in line outside the IKEA branch in the coastal city of Netanya on April 26, 2020. (Yossi Aloni/Flash90)

With the new investment, the two parties hope to extend IKEA’s financial services “to its 706 million annual in-store customers and 3.6 billion e-commerce visitors worldwide,” they said in the statement on Tuesday.

“When two companies as aligned as Jifiti and Ingka Group take their partnership to the next level through investment, it signals the first of many exciting changes in the landscape of the industry,” said Yaacov Martin, CEO and co-founder of Jifiti, in the announcement. “This investment will empower both our organizations to achieve our goals in the point-of-sale financing space, and fuel Jifiti’s technological and international growth.”

The Jifiti team in Israel. (Courtesy)

Krister Mattsson, managing director of Ingka Investments, said the new deal with Jifiti “will further our integration of easily accessible financing solutions into the IKEA offering.”

“We are confident this new investment will support us even more in becoming a life-long partner to our customers, by helping to improve their life at home and grow their businesses,” added Mattsson.

Weisband said the funds will go toward expanding Jifiti’s presence worldwide to meet demand, growing its teams, and developing more products.

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