How We Structure Our Product to Benefit Consumers
At Kafene, our interests are fully aligned with those of the customer. We’re a lease-to-own (LTO) point-of-sale financing option that merchants can choose to offer their customers as an alternative to paying with cash or card. This carries increased importance for those who are credit-challenged and may have limited, or even no options for the purchase of durable big-ticket items such as furniture, appliances, electronics, tires and other goods.
To choose us as an alternative financing partner to do business with their customers, merchants must be able to place trust in Kafene to deliver best-in-class customer experiences and outcomes. Any failure on our part to do so would hurt the relationship between merchants and their customers, which we believe would lead to our merchant partners quickly voting with their feet.
Kafene believes that whenever a financial services company works with a credit-challenged consumer, it’s critical to be deliberate in establishing thoughtful, clear, and consumer-friendly business practices while proactively overcommunicating and being fully transparent.
To that end, below is a series of commitments Kafene has made to do right by consumers, as a self-governing list of “Consumer-Friendly Commitments”:
Consumer-Friendly Practices & Product Design
We let consumers terminate early without any additional or ongoing obligations
Unlike debt, Kafene’s LTO model allows the customer to terminate at any time without any outstanding obligations. Customers can terminate their leases without making any additional payments or facing any negative credit implications. At the same time, if they make all their payments or pay early, they own the item.
We build our product so the vast majority of those who lease will reach full ownership
If the vast majority of customers aren’t able to successfully pay off their purchases in LTO transactions to the point of becoming full owners, then we’re not doing a good enough job by the consumer. As of May 2022, more than 75% of those who lease with Kafene become full owners and we’re aiming to raise that figure significantly in 2022.
Consumers pay less for items than if they financed with a credit card
Credit cards make for expensive forms of debt. Our goal is for the vast majority of customers to be paying less from a total cost of ownership perspective by leasing with Kafene than by financing with a credit card. Today, this is true of roughly two-thirds of customers. Again, we’re aiming to raise that figure significantly in 2022.
We build our products so all consumers – even those who fully utilize the term of their leases – elect to repeat transact with us
With Kafene’s LTO model, customers who pay off their leases in the first 90 days pay only a flat processing charge. Unfortunately, those who make only the minimum payment over the maximum term do pay more. However, we are focused on ensuring that even this customer seeks to repeat transact more often than not, demonstrating that they value our service.
We always report all positive payment history to major credit bureaus
We believe in taking the time to make sure positive payment history is rewarded, which helps boost credit scores – sometimes meaningfully.
Customers who have successfully paid off a prior lease will pay less next time
100% of customers who have successfully paid off a prior lease will have a lower total cost of ownership on subsequent transactions. We do risk-based pricing and they’ve demonstrated positive payment history.
We take a friendly approach to collections
We work with consumers directly in the event of inability to pay their lease, and we’re accommodating in the event that they need to temporarily pause payments.
Consumer-Friendly Data Practices
Extending financing to the underbanked at the point-of-sale with risk-based financing helps consumers get the best and most affordable terms possible. At the same time, traditional FICO scores and Vantage scores simply don’t work for this population. We collect significant quantities of alternative data to help us paint a real picture of a consumer’s financial stability. We take our responsibilities when it comes to privacy very seriously.
These are basic guidelines we will always follow:
Never resell data
We believe that if a company generates non-public data, it carries an obligation not to resell it.
No cross-selling unrelated goods and services
If data was collected to facilitate a credit-like transaction such as lease-to-own, we believe there are appropriate instances to offer other products within the sphere of consumer credit, but we do not believe it is ethical to monetize data through unrelated services, such as selling advertising.
Overcommunicate in layman’s terms how data will be used
We believe in being as transparent as possible as to how data will be used and we make sure our transparency is never obscured by legalese.
Respect any requests to delete data
Customers sometimes ask us to not use or delete their data. We have a responsibility to honor their wishes.
Self-audit to ensure data usage is free of bias
Financial services companies that employ risk-based pricing must invest time and money to ensure that conclusions or actions reached from data usage are free of bias. Kafene takes extensive measures to ensure it is not unknowingly selecting or targeting particular groups of consumers based on correlative data.
Keep data maximally secure
This should go without saying in today’s world. Kafene respects data integrity and privacy. Protecting PII and generated data is a fundamental responsibility.