BNPL Provider Zip Plans Fee Hikes to Offset Inflation, Interest Rates

Australian buy now, pay later (BNPL) company Zip is planning merchant and consumer fee hikes to help it ride out a tough market environment of soaring inflation, rising interest rates and tighter regulations, according to a Thursday (June 22) press release.

“We acknowledge that while we are not immune to market volatility, there remains significant opportunity for Zip and buy now, pay later products in a heightened inflationary environment,” Zip said in the release.

The business has a “solid pipeline of enterprise merchants coming onto the platform,” and core market customer growth and transaction volumes are “consistent,” the release stated. Plans to acquire BNPL rival Sezzle will go for a shareholder vote before the end of 2022.

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Zip said in the release, which it issued in response to “ongoing commentary on the industry and changes in the external trading environment” that the company can offset the “effects of rising interest rates.”

Several proposals are in the works, including “weighted average margin benefits from the refinancing of legacy receivables” and increased customer repayment velocity in addition to consumer fee hikes and merchant repricing, according to the release.

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“We have been clear that in response to current market conditions, our strategic priorities are to focus on our core business, both products and regions, and accelerate the group’s path to profitability,” said Zip Co-Founder and Global CEO Larry Diamond in the release. “In an environment where wage growth is falling behind heightened inflationary pressures, affordability becomes an even more important priority for consumers as they budget each month.”

“We believe our business model will stand up exceptionally well in such an environment as we continue to provide significant value and benefit to our customers and importantly our merchant partners seeking to drive continued growth,” Diamond added in the release. “We are well-funded and positioned to execute on the significant market opportunity as we execute and take control of our future.”