Fast-Growing Finance Providers are Due For a Health Check; FVE on Zip Reduced

Zip has taken market share from Australia’s established credit card issuers by providing mainly younger consumers a convenient, cheap form of financing for low value purchases (averaging about AUD 215). A supportive regulatory environment, including RBA’s capping of interchange fees allows Zip to charge a higher merchant fee (averaging 3%) than Visa and Mastercard credit cards (0.9%). Larger merchant fees allow Zip to subsidise cheaper financing for consumers. Use of more contemporary technology also makes it easy for consumers to register and finance purchases, as well as manage their accounts and pay merchants with its two core products of Zip Pay (around 40% of revenue) and Zip Money (about 60%), with future revenue set to be generated from small to medium enterprises from Zip Business that began in fiscal 2020.