3 Things: BNPL Fraud Protection, Labor Marketplace for Therapists, Magic Merlin Suit for Adults

Happy Sunday and a very warm welcome to all the new subscribers! I’m thrilled and honored to have you as readers and truly appreciate your thoughts and feedback 🙏. Each edition of 3 Things will contain a dive into 3 rabbit holes I’ve found myself going down recently. Subscribe to get each week’s edition straight to your inbox and if you enjoy it, please share (I suck at self-promotion so can use your help)! This past week I’ve been thinking a lot about:

• Buy Now Pay Later Fraud Protection

• Labor Marketplace for Therapists

• Magic Merlin Suit for Adults

1. Buy Now Pay Later Fraud Protection

Only a few years ago, the “Buy Now Pay Later” (BNPL) landscape consisted of a few players like Affirm, Klarna, and Afterpay. As of today, there are well over 50 companies offering these services across the globe creating a $100B+ market. These companies enable consumers to purchase an item online and receive it immediately but pay for it over time in a series of installments, often at 0% interest to them. While there are many pros to BNPL, and adding it to a checkout flow often results in higher consumer conversion (which is why the merchants typically pay what would be the interest fee to the BNPL provider), there are also risks and downsides for both the financiers as well as the shoppers. On the customer side, if you don’t pay on time there are often associated late fees and these purchases aren’t shared with the credit bureaus so don’t help build your credit score. For financiers, there is the risk of default where customers don’t pay back the remaining balance.

As of 2021, the use of BNPL solutions outpaced traditional loans with 37% of shoppers using this financing option in the past year alone. BNPL does not require a credit check at checkout which makes it all too convenient for people (particularly Millennials and GenZs) to use who probably shouldn’t be essentially taking a loan. Additionally, criminals are loving BNPL as a new channel to exploit given the more lax fraud protections and ability to pay only ~25% of the item price. Similar dynamics popped up with the rise of Shopify and spawned numerous large startups combatting e-commerce fraud for merchants such as Riskified, Signifyd, Sift and more. A startup could offer credit checks and other fraud protection services to BNPL fintech companies and potentially even the underlying bank partners who are typically on the hook to shoulder losses and defaults associated with fraudulent loans. Similar to what Checkr does for background checks, the company would be the underlying infrastructure providing real-time credit checks/creditworthiness scores based on data and algorithms that they create.

2. Labor Marketplace for Therapists

Discussing the “unbundling of LinkedIn” is not a new concept and many companies have tried to pick off pieces of the behemoth since it became the dominant platform for professional resumes, hiring, and community. Over the last few years, a few verticalized solutions have taken off in categories like nursing (Trusted Health and Incredible Health) and oil/gas/construction (WorkRise, fka RigUp). These industries have worked well for specialized solutions given there is high demand, increasing supply, and high/repeat usage of both supply and demand. When looking at other industries that are ripe to pick off and create a vertical labor marketplace, mental health professionals seem like the perfect place to target right now.

The past two years have brought mental health into the forefront for almost all individuals, employers, and investors. In 2020 alone, over $1.5B of venture capital was poured into the sector to back founders building for all types of conditions and a wide range of ages and demographics. Currently, 1 out of every 4 adults in the US reports suffering from anxiety or depression. Similar to the rise of fintech with many things turning into fintech or having embedded fintech within their products, I predict an absolute insane number of mental health solutions and “embedded mental health” within other products. On the backend of theses solutions, there are mental health professionals who are providing the services and care. They range from psychiatrists who can prescribe drugs to licensed therapists, counselors, psychiatric registered nurses, and others who are trained to deal with less acute mental health conditions. A vertical labor marketplace can take the playbook of the other successful startups and become the go-to place for mental health professionals to come for flexible work opportunities, community, continuing education, and more. On the other side of the marketplace, the company would provide supply to the myriad companies that need behavioral health workers to grow their startups.

3. Magic Merlin Suit for Adults

If you a parent with young kids, this one might immediately makes sense to you :) When a baby is born you swaddle them when then sleep, but once they start rolling over, you need to unswaddle them and transition into a sleepsuit or sleep sack (which is essentially just a wearable blanket since apparently regular blankets… and basically everything… is a choking/suffocation hazard). One of the most popular transitional sleep outfits right now is Baby Merlin’s Magic Sleepsuit. Founded by a pediatric physical therapist and mother of four, the suit is meant to create a slightly weighted, breathable suit that comforts and calms a baby in the crib. I call it the “marshmallow suit” because it feels like a giant marshmallow, and honestly, it looks so incredibly comfy and comforting that I’m jealous and want one of my own.

In general, the baby industry prints money since parents are willing to spend a seemingly endless amount on their kids. Many popular children’s clothing brands also make matching clothes for parents; both for everyday wear as well as holiday getups that are mostly intended for photo ops. Weighted blankets have also been increasingly popular among adults to help calm anxiety and improve sleep, generating a market that is already worth ~$220M annually. Similar to the Magic Sleepsuit, they mimic the feeling of being hugged or held which is all too welcome in an increasingly stressed, sleep-deprived, and anxious world. A company could create a product similar to the Baby Merlin’s Magic Sleepsuit targeted at the adult population and become the new Snuggie (which sold over 30 million units by 2017 for an estimated $500M). They can offer a matching baby product as a wedge to make it socially acceptable for adults and then launch funny viral videos and ads on TikTok and Instagram. Just imagine holiday cards with the whole family dressed in these 🤣. In addition to having calming benefits, there could also be different weights (both physically and in terms of warmth) so that couples who have very different ideas of the optimal sleep environment can each get what they want.

That’s all for today! If you have thoughts, comments, or want to get in touch, find me on Twitter at @ezelby and if you enjoyed this, please share with a friend or two!

~ Elaine