Australian fintech is in rude health with yet another major investment in a maturing startup, this time with ZipMoney attracting a A$40m investment from Westpac. While significant for the Aussie fintech ecosystem, the deal heralds a step-change in the provision of retail credit at the point of sale (POS) in Australia that will drive an increase in unsecured personal lending.
Westpac’s investment in ZipMoney is notable not simply for its hefty price tag; the deal will see Zip’s products integrated for use across Westpac’s network in Australia, a huge boost for a fintech that has only processed A$300m in transactions so far. As Westpac is the second largest merchant acquirer in Australia according to GlobalData’s Merchant Acquiring Analytics, the scope of this boost cannot be overstated.
Zip provides users with a revolving line of credit, which includes an interest-free period much like a credit card, only over a longer duration. Where it differs is in the speed of its approval process, which is real-time even at the POS as opposed to several days at some banks. This maximises convenience for digitally savvy consumers such as millennials, among whom Zip has attracted over 665,000 users.
With Zip to be integrated by a significant slice of merchants across Australia, the service will be a payment and financing option for a huge variety of purchases for a huge swathe of the population, not just millennials looking to buy clothes online.
Given the ease of obtaining and using the credit, services such as Zip will displace existing retail finance options. Consumers like it because of the lack of direct fees, while merchants like it – even with its costs – because they get paid upfront and their customers can buy more from them.
Moreover, with the lack of direct costs, the added convenience, and generally good customer experience, services like Zip and rival Afterpay are sure to increase the use of this type of financing. This will provide a shot in the arm for retail finance, an area of personal lending that has struggled to grow in recent years.