I was just reading the Key Risks as outlined in the Investor Presentation recently and noticed this:
C. High rate of early paydown by borrowers
In Australia, Zip’s customers may choose to repay their line of credit sooner than expected. Early customer repayment may be caused by changes to a customer’s personal circumstances (for example, as a result of additional income or a one-off windfall gain) or as the result of macroeconomic events (such as early access to government economic support payments). Whilst Zip assumes a certain rate of early repayment as part of its business operations, a higher-than-expected rate of early paydown by borrowers could have a material adverse impact on Zip’s operations, financial performance, financial position, reputation and/or future prospects.
Can anyone please help me understand why customers paying off their credit sooner is a risk?
For example, if someone is using Zip Pay and makes early repayments, why is this bad?
Thanks
(20min delay)