Zip Share Price up Big on Quarterly: Are Credit Cards Dead?

At time of writing, the share price of Zip Co Limited [ASX:Z1P] is up significantly, 9.12%, and trading at $3.47.

While it has come down from a top of $3.98, the stock has still delivered a return of more than 260% in a 12-month window:

zip

Source: tradingview.com

Today, the Zip released its quarterly report which revealed significant progress across a variety of key metrics. The success of the company points to a troubled future for the big four’s consumer lending profits and credit cards. They could go the way of the dodo, or at least the newspaper.

Zip share price performance driven by strong quarterly

Released just before the commencement of trading, the Zip quarterly report was met with approval by investors, leading the share price to rise as high as $3.54.

Amongst the highlights from the quarterly were the following key details:

  • Transaction volume up 108% to $1.1 billion
  • Customer numbers up 80% to 1.3 million
  • Quarterly revenue up 17% on Q3 to $27 million
  • Net bad debts down to 1.63% from 1.75% in Q3
  • Merchants up 13% to 16,249 including Kmart Australia and Just Group joining the platform
  • Sixth consecutive quarter of positive cash EBTDA with EBTDA of 2.2% of average receivables in Q4, up from 1.7% in Q3

The company noted that, ‘consistent with Zip’s strategy of penetrating everyday spend, the average transaction value on a Zip account dropped by 25% to $217. Interestingly this compares with $103 for Visa and Mastercard, and $229 for American Express.

Managing Director and CEO Larry Diamond had this to say:

As a credit card disruptor, we continue to see large numbers of customers adopt the Zip interest free digital wallet as we strive to be the first payment choice everywhere and every day.

Fintechs going after credit cards, banks

In previous coverage, we noted that National Australia Bank Ltd [ASX:NAB] reported a 20.6% decrease in its consumer banking and wealth division in its most recent half yearly results.

And it stands to reason that there will be more pain ahead for the banks at the hands of fintechs.

Afterpay Touch Group Ltd [ASX:APT] now has a bigger market cap than AMP Ltd [ASX:AMP].

This gives you a sense of the massive changes afoot — the new generation of consumers are wary of debt, and if they do have some, they want to make sure it’s manageable.

As a result, I believe that while credit cards may cling on like newspapers have, they will largely be the preserve of an older generation.

If you want a look at why banks may shave their dividends in the coming months and years, make sure to read this free report.

If you want a look at three ASX-listed disruptive fintech stocks, that can be downloaded here.

Regards,

Lachlann Tierney
For Money Morning


Lachlann Tierney is a writer for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Ryan is involved in three publications:


Leave a Reply

Your email address will not be published. Required fields are marked *

Money Morning Australia