Zip Co said it would be more cautious in its lending and cut costs by $30 million as falling buy now, pay later (BNPL) stock prices increase pressure on loss-making operators to show that they can make a profit.
After a period of intense competition among BNPL vendors, the Sydney-based fintech said on Thursday that bad debts had risen outside its target range, a similar trend seen at rival Afterpay earlier this month.
The total value of trades on its platform rose 26% year-on-year, but UBS analysts said that was below market expectations as Zip reiterated its intention to turn a profit sooner than expected.
Zip, a key local rival to Afterpay, offers short-term installment loans in Australia, the United States and markets around the world. He is trying to disrupt the global credit card market, which is dominated by banks.
While BNPL’s companies were among the most hyped stocks on the stock market at the start of 2021, their stock prices have plummeted since the second half of last year as investors worry about the impact of rising interest rates on technology company valuations, fierce competition and rising bad debt.
Zip shares fell 4.6% to $1.15 on Thursday and so far this year have fallen about 70%.
Zip’s co-founder and chief executive, Larry Diamond, reiterated that the company aims to accelerate its trajectory towards profit making – which it has previously said it hopes to achieve by 2024 based on pre-tax profits, depreciation and amortization (EBTDA).
“In the half-year results, we recognized a change in external factors and announced several adjustments to our strategy – with a refined focus on sustainable growth, a strong unit economy and rapid profitability,” Diamond said.
“The quarter allowed us to continue to deliver top line growth and strong revenue margins as we begin to execute on this renewed strategy.”