BNPL Firm Zip promises more conservative lending
Australian Buy Now Pay Later (BNPL) firm Zip Co says it will be more cautious about its lending and cut costs by $30 million ($22.5 million) while BNPL stock prices fall.
As reported by the Brisbane Times on Thursday (April 21), Zip said its bad debts had exceeded the target range, similar to what Afterpay recently reported.
While the total value of transactions on the Zip platform rose 26% year over year, the Brisbane Times report quotes analysts at UBS as noting that this fell short of expectations as Zip reiterated its plans to turn profits earlier than originally expected .
Zip, a major local competitor to Afterpay, offers short-term installment loans in Australia, the US and other markets around the world. While companies in their industries were among the most popular stocks on the market over the past year, their prices have fallen sharply since then as investors worry about things like the impact of rising interest rates and bad debts.
Continue reading: FinTech lenders follow banks into uncertain economic climate
PYMNTS examined the uncertain landscape of the FinTech lending world earlier this week and found that a look at the FinTech IPO Index suggests expectations (from investors) are less than optimistic. As of last week, this index, which includes companies like Open Lending and MoneyLion, is down about 27% this year alone.
Larry Diamond, Zip’s co-founder and chief executive, said the company is aiming to accelerate its path to profitability, a goal the company hopes to achieve by 2024 on an earnings before tax, depreciation and amortization (EBTDA) basis.
“In the half-year results, we acknowledged a shift in external factors and announced several adjustments to our strategy — with a refined focus on sustained growth, strong unified economics and fast profitability,” said Diamond.
“During the quarter, we continued to deliver top-line growth and strong top-line margins as we began executing this updated strategy.”
See also: Zip Co acquires BNPL firms Twisto Payments and Spotii Holdings
Last year, Zip C announced it would acquire BNPL companies Twisto Payments and Spotii Holdings in a deal that put the two companies’ combined valuation at A$180 million (US$133 million).