The Next Chapter, page-1591

You are correct LordN. Finally someone said it.

I note there are crickets from Tekvest on your comment, "a fixed cost per transaction to the merchant and a %".

He still thinks its "about 2.2%" and therefore "volume based" and therefore he should not understand why they spent time removing unprofitable merchants and converting to the non-funded model as much as they can. There would be NO "unprofitable" merchants if it were simply "about 2.2%" volume based as all merchants doing more volume than $0 should make "about 2.2%" profits, right?. wrong.

Doing the maths on the funded model the numbers actually shows that longer duration loans (18-24months) and higher value purchases actually can cost splitit money. Its the total interest Splitit pays on the borrowed money in that long timeframe that make it unprofitable. The fixed transaction fee is also a very small % of the total sale. ($1 fixed charge for a $10000 purchase is 0.01%) [not saying fee its $1 but for comparison to below]

The most profitable loans for Splitit are short term and low duration. Example, for a 4 month plan Splitit are paying monthly interest on only 3 months (first installment charged and not borrowed/funded) at an annual rate (p.a.) on a reducing principal each time the consumer is charged monthly, so very little interest cost to fund the short duration purchase. The fixed fee transaction Splitit charges is also higher % of the transaction. ($1 fixed charge on a $100 purchase is 1%)

Similar applies for the non-funded model with the transaction fee forming a higher % of smaller purchase amounts so greater % profit on those smaller purchases aswell.

Splitit removing non profitable merchants in the past would have involved putting merchants who have chosen to offer very long duration payments on the non-funded model. And if they did not want to accept changing to the non-funded model then complete removal.

So when people claim its purely volume driven and "$10 or $100k theoretically there is no difference"....(cough tekvest)....they are plain wrong in understanding and should research the models (for the 10th time now)

If Splitit does $100k MSV in 1000 x $100 transactions with a $1 transaction fee they make $1000 on that alone.

If they could do the same $100k MSV in 1 transaction they make $1. % fee is same as above so thats $999 less profit for the exact same volume...clearly not volume driven is it.

"theoretically" there actually can be a huge difference.

Sneef - Correct IMO, Smaller the better. (but obviously too small splitit is no benefit/use to the consumer as someone said)
Operating expenses should not increase as its a scaleable tech. (much)
Funding costs can however increase depending on model.
No issues with what you say if non-funded model used, it works. Most bigger companies would be ok with funding themselves aswell as cashflow is cashflow to them and is less lumpy as opposed to small businesses more lumpy cashflow.