(Reuters) – The Australian buy now, pay later company, Zip Co Ltd, said on Wednesday that it would raise fees for both customers and merchants. The company is trying to protect its business from the effects of rising inflation and interest rates.
This year, the company’s shares have dropped by almost 90%. This is because higher interest rates and less spending by consumers have raised the industry’s funding costs, and tighter regulations have made it harder to get credit.
Zip said it was in a good position to deal with the effects of rising interest rates by taking steps like raising fees for consumers, changing the prices merchants charge, and making it faster for customers to pay back loans.
“We know that we are not immune to market volatility, but there is still a lot of room for Zip and buy now, pay later products in an environment with higher inflation,” it said.
The company, which has never made a profit in a year, has also been cutting costs in order to make a profit in fiscal year 2024.
It hopes that the initiatives will bring in more than A $30 million ($20.8 million) in benefits, and it said that it would continue to review capital allocation for its businesses in Canada, the Czech Republic, and Mexico, which are in the “rest of the world” (RoW).
Zip’s shares are on track to have their worst year since they started trading in 2009. They closed at their lowest level since April 2016 in a market that was generally weaker, while Sezzle, which Zip plans to buy for $350 million, fell almost 9 percent.
Zip also responded to recent comments about how BNPL products might be regulated in Australia by saying that it was in favour of “simple, purpose-built regulation.”
It said that as of the end of March, it had A$303 million in cash and other liquid assets, which it thought would get it to cash flow breakeven in 2024.
(1 dollar equals 1.4472 Australian dollars).
