Sector: Finance Services (BNPL)
Everyone thinks or expect that Zip will be the next AfterPay. Firstly, it is important to understand the differences between these two companies and most importantly to know what’s really happening in the BNPL sector and Zip world at moment and ultimately what are the growth prospect for this company. We are going to be posting a full BNPL sector analysis soon in our portal, but in the meantime, lets see what’s happening with Zip.
As well as After Pay, Zip is also a major international player, The company claims to be well placed and are on its way to become a true global BNPL Leader – currently operating across AU, NZ, US and SA, with over 4.5m customers, annualised TTV of c.$3.8b+ and annualised revenue of over $280m. The company has multiple brands, including ZIP AU, Zip Global and Spotcap. It offers users digital wallets called either Zip Pay or Zip Money.
Afterpay has much more of the European market (after the recent acquisition) and also Canada. What we like in Zip compared to AfterPay is that Zip has a slightly different business model to Afterpay, offering not only BNPL services, but also personal finance management/education through its Pocketbook app. Additionally, Zip offers unsecured loans in different capacities. Zip is also more flexible than AfterPAy on the payments platform and these difference could be the key difference over time.
Some of the Key metrics that has been highlighted in the last Report and we believe is relevant for what we are trying to achieve in this analysis of the company are that Zip continue to growth just as described as following:
- Record quarterly revenue of $71.7m (up 88% year over year).
- Record quarterly transaction volume of $943.1m (up 96% year over year), now annualising at $3.8bn. Transaction numbers were up 130% year over year).
- Customer increase to $4.5m,up 114% year over year (628K added in quarter).
- Merchants on the platform increased by 69%.
- AU monthly arrears reduced from 1.33% in June to 0.91% in September, confirming an outstanding result in the current climate. This is a great forward indicator of future losses.
- Zip has partnered with Visa thereby becoming a principal issuer with Visa and signed a strategic agreement with Marqeta to further innovate around the payments experience.
- Completed the acquisition of US BNPL QuadPay, providing immediate access to the $5t US Retail market. QuadPay delivered record results across all core metrics ($322.5m in transaction volume), $23.4m in revenue and closing the quarter with 2.2m customers.
- Brands that has joined the platform in Australia last quarter included Pizza Hut, Priceline, Living Edge Furniture, Winning Appliances, Fila, Aquila, Bugaboo and Primary Dental.
- Brands that has joined the platform in New Zealand are Chemist Warehouse, Cotton On Group, NZSale, Secretlab, Playtech, The Toolshed, Bivouac, Shine On, Postie, Smiths City, Northbeach, Storm, Augustine and Macpac.
- Pocket book app will shortly support more than 120 new banking institutions empowering many more everyday Australians to take control of their finance.
- Capital management of the company seems to be consistently improving to fund further growth.
- NAB recently mandated to raise an additional $300m through the issuance of a new rated note series within the Zip Master Trust. This increases undrawn facilities to fund Australian consumer receivables to $463.6m.
- Secured a revolving line of credit up to US$200 million from Goldman Sachs, Oaktree Capital to fund growth in the US.
- Partnership with VISA for its latest announcement of Tap and Zip will help Zip to reach a much larger audience as users can shop effortless anywhere that Accepts Visa payments online and Visa contactless payments in-store. This move by Zip will definitely reach consumers that want to use their digital wallet to pay for everyday purchases.
Zip is definitely a company that we want to have in our portfolio, and because all the facts we have highlighted in this analysis, we believe there is great potential for Zip to growth much further as the company keeps partnering with new retails as well as comapanies like VISA that will immediatly help generating revenew, and finally further expanding on new off shore markets as it did by acquiring Quadpay and There are so many other markets to exploit. Note that it doesn’t matter how good APT share prices are doing, we have to focus on Zip itself and its prospect acquisitions, partnerships and innovations, these are the indicators that will take the share price to new levels and therefore bring value the shareholders.