Sometimes we do an interview and then have to sit on it for a while.

And so today we bring you Qlarifi, a startup we actually spoke to in January but agreed to hold off on publishing until now. It’s a really interesting fintech story…

But first:

• Here’s some encouraging news for the UK deep tech sector…

• Average university equity stakes in spinouts have fallen sharply amid competition for investors , the Royal Academy of Engineering’s latest ‘Spotlight on Spinouts’ report.

• “In 2024 the average university equity stake was 16%, down sharply from 22% in 2023” - that’s good news for encouraging more space on cap tables for future investors.

• You can read the full report here.

– Martin

Qlarifi knows what you’ve been buying now, and paying later… in real-time

With Klarna gearing up for an IPO in the US, the buy-now-pay-later (BNPL) space clearly isn’t going anywhere.

Whatever you think about letting consumers spread the cost of often relatively small-ticket items over multiple payments, it’s increasingly popular with financial services companies and the public alike.

One reason that BNPL can spur worries about consumers taking on more debt than they can handle from multiple loan providers at once, is the fact that traditional credit bureaus aren’t geared up for these kinds of low-value, spur-of-the-moment transactions.

Enter Qlarifi, which CEO and co-founder Alex Naughton describes as “the world's first buy-now-pay-later specific credit bureau.”

Qlarifi takes data from BNPL loan providers, with the aim of helping lenders of all kinds make more informed underwriting decisions. Meanwhile, regulators and the BNPL industry can get a more detailed understanding of what kinds of additional consumer protections they might need to put in place.

“What happens today, unfortunately, is that when a consumer uses a buy-now-pay-later product, none of that data is shared with any other lender that they may choose to get a loan with,” Naughton explains.

“That has some serious downsides, both for the consumer and the lender. The lender is unable to make more informed decisions because they don't know what else the consumer has done across the buy-now-pay-later ecosystem.

“And for the consumer, it may mean that if they're good and they're responsible, they can't leverage this good information to go and get another type of loan, and if they're an irresponsible consumer, or they're just maybe perhaps a little naive, there aren’t the protections in place to prevent them from going and getting other types of credit.”

And regulators such as the UK’s Financial Conduct Authority could be pleased to see Qlarifi emerge, too.

“Regulators want to see transparency because they don't want consumers to be able to go to multiple different lenders without protections in place,” Naughton adds.

How it works

Naughton explains that BNPL loan providers will typically run a ‘soft’ credit check via one of the major credit bureaus when a customer they have little data about applies to pay for a purchase with them.

But while these bureaus have access to things like your mortgage payment history, car finance agreements, credit cards and the like, they don’t hold BNPL data.

That’s where Qlarifi steps in. Lenders can send an API request to receive details of a prospective customer’s BNPL history, right at the moment when they’re applying to make a purchase.

Qlarifi’s data is real-time, meaning lending decisions can be informed by any current repayment balances the customer may have, along with behaviour like missing payments or delaying payments.

“If on Black Friday, I go and make a series of transactions across multiple different buy-now-pay-later providers, each one of them will know exactly what I've done up to the minute, so there is no delay in information, and they can pull that exact data set,” Naughton says.

The story so far

Naughton knows the BNPL space well because he was previously head of UK, Ireland, and the Netherlands for Klarna, having previously helped the company scale its US business.

Prior to that he worked for another BNPL provider called QuadPay, so it’s safe to say he understands what he’s getting into here. It was at QuadPay where Naughton met Loïc Berthou, with whom he would go on to co-found Qlarifi.

The pair were frustrated that they’d had to deal for years with a scarcity of useful customer information to inform lending decisions, and the situation wasn’t getting better.

And so seeing untapped demand, and a with good chunk of first-hand experience, Naughton and Berthou started work on Qlarifi in late 2023.

Inspired by Stripe’s simplicity-focused reboot of payments tech 15 years ago, they’re looking to do the same for the credit bureau world.

With his technical background, Berthou had spotted an opportunity for bringing a fresh approach to credit referencing; one that wasn’t built on top of legacy tech like at the big credit bureaus, and that updated in real-time. This would make it easier for BNPL companies to integrate with, and make use of, the data, helping them grow by taking on more good customers.

“We wanted to rebuild what ‘ideal’ would look like for a credit reporting bureau. Unfortunately, bureaus today are built on a series of acquisitions over the last 30 years. There’s nothing wrong with that strategy, but it means it's just a hodgepodge of tech and there hasn't really been thoughtfulness in how to build it from the ground up,” Naughton says.

He explains that the underlying architecture has been built with modern factors like data protection regulation compliance and real-time accuracy in mind.

They’ve also learned from the pain points BNPL companies suffer when they launch into new markets. Qlarifi allows them to instantly integrate their new entity, rather than having to set up a whole new set of integrations as they would with other bureaus.

With the tech now complete, Qlarifi has been busy conducting a ‘proof of value’ test with the BNPL industry to make sure it works exactly as the market needs it to.

Funding

Qlarifi last week announced its first external funding; a £1.4 million pre-seed round from HoneyComb Asset Management, Carthona Capital and angels who include Australian rugby legend John Eales. Naughton is also Australian, so that’s not quite as random as it might seem.

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