Popular buy now, pay later company sees bad debts rise
One of Australia’s largest buy now pay later businesses has set a new earnings record as more people use the service to pay for daily essentials such as utilities and insurance.
The news boosted Zip shares, which jumped more than 15 percent after it was revealed that quarterly cash earnings rose 41 percent to $65.1 million.
Zip’s total transaction volume rose 22.4 percent to $4 billion in the March quarter, while its operating margin rose to 19.4 percent from 16.5 percent a year earlier.
Bad debts increased, rising from 1.6 percent of total transaction volume a year ago to 1.9 percent in the March quarter.
Zip said this was within management objectives and that it forecast bad debts to fall below 1.75 percent of total transaction volume in the June quarter.
In Australia and New Zealand, where it has nearly two million customers, spending with Zip increased 18.2 percent.
“Growth has been driven by increased use of Zip for everyday expenses, including utilities, insurance, education and healthcare,” he said in a statement.
Zip also operates in the US, where it has 4.6 million active customers.
The number of sellers on the Zip platform increased by 12.7 percent to 93,900, while Zip’s total number of active customers increased by 3.5 percent to 6.5 million.
“Zip’s resilient business model continues to drive profitability at scale,” said Cynthia Scott, chief executive officer.
Zip now expects earnings of at least $260 million for the full year, excluding tax, depreciation and amortization.
Zip had previously forecast second-half earnings to be broadly on par with the first half’s $124.3 million; This translated into cash earnings of approximately $248.6 million for the full year.
According to fintech group Raiz Invest, consumer spending in installments increased by 26 percent in the last three years, rising from $469 per month in January 2023 to $589 in January 2026.
Raiz Invest chief executive Brendan Malone told AAP that much of the spending was related to households managing shopping bills, paying school fees and trying to make ends meet.
Zip shares were changing hands at $2.37 in morning trading; Although it has decreased by 31 percent since the beginning of the year, it has increased by 50 percent compared to last month.
Zip has partnered with TPG Telecom in Australia to launch ZMobile on April 9, a new mobile offering that allows customers to activate an eSIM and manage their plans in the Zip app.
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