Aussies spend billions on buy now, pay later, which allows them to spread across their payments without losing out on a big sum in one fell swoop. What’s more, it cushions the blow of rising interest rates. The US is witnessing a similar trend. This has brought financial services like Zip (ASX: ZIP) into the spotlight, offering BNPL and flexible credit services. In Q3 FY24, the Company saw its overall earnings and revenue surge compared to PCP.

New enterprise merchants onboarded during the period include Vallarta and Follett in the US, Temu in ANZ, Wynstan in AU and JB Hi-Fi and Sydney Tools in NZ.

In Q3 FY24, Zip reported underlying Group cash EBTDA of $20.1 million, driven by a particularly strong performance in the US business and continued margin expansion in AU. Including year-to-date adjustments, the year-to-date Group cash EBTDA is $45.2 million. Zip expects to deliver an H2 FY24 Group cash EBTDA result of not less than its H1 result of $30.8 million.

CEO and Managing Director Cynthia Scott said, “It was a standout quarter for the Americas, with TTV growth of 43.6% driven by increased customer engagement and a strong credit performance, with US credit losses at 1.3% of cohort TTV. During the quarter, Zip continued to focus on product innovation and delivering great customer and merchant outcomes. 

“In the US, our collaboration with Google Pay experienced positive momentum continuing to scale. In Australia, we have seen strong customer engagement and unit economics with our new product, Zip Plus. We welcomed new merchants to the Zip platform including Vallarta and Follett in the US, Temu in ANZ, and Wynstan in AU and have a strong pipeline of merchants.”

Overall, the BNPL company’s transaction volume of $2.4b was up 14.6% on Q3 FY23. Revenue of $219.2m, marked a surge of 26.6%, and revenue margin improved to 9.1%. Its transaction numbers of 17.9m remained largely flat on PCP, while its cash transaction margin was 3.9%. 

At the end of Q3 FY24, Zip’s active customer numbers were six million, with merchants increasing by 9.1% to 77.7k.

However, compared to the last quarter, Q2 FY24, the Company’s performance has been softer. 

Its overall revenue is down 2.1% on Q2, and its transaction volume is down 12.6% (driven by a 21.5% reduction in ANZ) to $2.4 billion. Its overall transactions are down 12.9% to $17.9m. 

This follows rising interest rates, lowered spending capacity and the Australian government’s proposal to regulate BNPL. The proposal, which came this year, would entail big changes for BNPL companies like Zip. It would include capping late fees, having longer application processes and reporting to credit rating agencies. 

However, Zip is not concerned since it has held an Australian Credit Licence since its inception and already offers two regulated products under the National Consumer Credit Protection Act – Zip Money and Zip Plus. But what this means for BNPL consumers remains to be ascertained. 

Zip ended the quarter with $95.2m in available cash and liquidity, up from $81.3m on December 31, 2023.