Australian buy-now-pay-later provider, Zip Co., has announced plans to relax credit criteria for its U.S. customers. The decision comes after the company achieved better-than-expected loss rates in the first quarter of the fiscal year.
In the first quarter, Zip's Americas unit reported losses of 1.3% of platform transaction value each month, surpassing last year's figure of 1.7%. This positive performance falls within Zip's target range of 1.5%-2.0%.
To improve results, Zip had previously implemented tighter credit criteria in the U.S. market. However, the company's recent success has prompted a reevaluation, allowing for a slight easing of settings to stimulate growth.
A key factor in Zip's confidence is the fact that the first-quarter transaction value saw a significant 29% year-on-year growth. Notably, this growth was primarily driven by existing customers rather than new users, reducing the risk associated with unknown repayment habits.
"Our existing customers are engaging more frequently with our platform. These are individuals whose credit losses we already understand," stated Cynthia Scott, Chief Executive of Zip Co., in an interview with Dow Jones Newswires.
With increased customer engagement and improved loss rates, Zip Co. is poised to capitalize on its momentum and further expand its presence in the U.S. market.
Zip's Customer Numbers Decline, Transactions Increase
Zip, a leading financial technology company, revealed that its customer numbers in the United States have fallen to 3.8 million. This represents a decrease of 1.1% compared to the previous quarter and 3.2% compared to the same period last year. The decline in customer numbers is attributed to tighter credit checks. Despite this, the number of transactions has seen a significant increase of 25% compared to the previous year.
Scott, a spokesperson for Zip, stated that this rise in transactions reflects consumers' reliance on installment payments as a tool for budgeting in the current challenging macro environment.
In terms of financial performance, Zip's first-quarter revenue in the United States witnessed impressive growth. It soared by 40% compared to the previous year, reaching US$64.0 million. This contributed to a group total of 201.9 million Australian dollars (US$127.9 million).
While Zip is known for its innovation, Scott announced that the company has halted the development of a cryptocurrency product as of March 2022. Zip's management had previously expressed interest in expanding into the crypto market. However, Scott clarified that the company has no intentions of revisiting this idea.
Additionally, Zip has decided not to submit any proposals to the Australian government regarding the proposed changes to crypto regulation. The government has recently announced plans to tighten regulations on cryptocurrency-trading platforms and increase oversight of customer funds.
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