By Stuart Condie
SYDNEY–Australian buy-now-pay-later provider Zip Co. plans to slightly relax credit criteria for U.S. customers after delivering better-than-targeted loss rates in the first quarter, Chief Executive Cynthia Scott said.
Zip on Tuesday said that losses at its Americas unit represented 1.3% of platform transaction value in each month of its fiscal first quarter. That compared with 1.7% in the first month of the prior fiscal year, and with Zip’s 1.5%-2.0% target range.
Scott said that Zip had significantly tightened U.S. credit criteria during the last fiscal year. The first-quarter performance, which came after two years of huge losses and a 98% loss in share value since early 2021, means that Zip can start to loosen settings to help accelerate growth.
Zip’s confidence was bolstered by the fact that 29% on-year growth in first-quarter transaction value was largely driven by existing customers, rather than new users with uncertain repayment habits.
“Our existing customers are transacting with us more often. They are credit losses that we already understand,” Scott told Dow Jones Newswires in an interview.
Zip said that tighter credit checks were why U.S. customer numbers fell to 3.8 million, down 1.1% on the June quarter and 3.2% on the year. The number of transactions still rose 25% on the year, which Scott said reflected consumers’ use of installment payments as a budgeting tool in a challenging macro environment.
First-quarter U.S. revenue grew 40% over the prior year to US$64.0 million out of a group total 201.9 million Australian dollars (US$127.9 million).
While Zip on Tuesday said that it would continue to innovate, Scott said that the company had ceased development of a cryptocurrency product in March 2022. Zip’s management had regularly discussed a desire to expand into crypto, but Scott said the company had no plans to revisit the idea.
Zip won’t make a submission to Australia’s government on proposed changes to crypto regulation, Scott said. The government this month said it was proposing tighter regulation of cryptocurrency-trading platforms, including tougher oversight of customer funds.
Write to Stuart Condie at [email protected]
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