BNPL Firm Zip Shares Hit 11-Year Low on Flat Earnings Forecast

Australian buy now, pay later firm Zip says it is seeing enthusiasm from American customers.

The company reported earnings Thursday (Feb. 19) that showed revenue growth of 46.4% for Zip’s U.S. business.

Growth during the company’s second quarter was “supported by a strong holiday trading period, which included the single largest day and month of transaction volumes in Zip US’ history,” the company said in its earnings release.

However, Zip’s share price fell to its lowest point in 11 years after it indicated it was expecting cash earnings to be flat for the second half of the financial year, Bloomberg News reported.

According to that report, the company’s projections were around 3% lower than Citi’s estimates, driven by weaker-than-expected net transactions, analysts found. UBS analysts, Bloomberg added, said the results missed because of softer new American customer additions, as well as an uptick in net bad debts.

The company’s success in the U.S. comes at a time when buy now, pay later (BNPL) is moving from being a checkout feature to “becoming a line item in the monthly household budget,” as PYMNTS wrote earlier this week.

This shift is the focus of “The Pay Later Ecosystem Report: Pay Later Moves into the Monthly Budget,” a February study from PYMNTS Intelligence. It found that installment plans on credit cards, store cards and standalone BNPL products are increasingly used to manage cash flow, rather than simply paying for large or seasonal purchases.

“As these tools become routine, the operational burden moves from approving the transaction to tracking due dates, balances and remaining payments,” PYMNTS wrote.

The research found that 31% of consumers used credit card installment plans in the previous three months, while 14% used BNPL, even after a slight December pullback in the middle of a period of record holiday spending.

It also showed that among consumers who live paycheck to paycheck, 36% reported using credit card installment plans and 18% used BNPL in the previous three months. That’s compared with a respective 25% and 9% among those not living paycheck to paycheck.

“Perhaps the most counterintuitive finding is that paying interest on BNPL is not always a signal of distress,” PYMNTS wrote. “BNPL users who do not live paycheck to paycheck are 1.5 times more likely to pay interest than those who struggle to pay bills, 36% versus 24%.”