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Buy now, pay later provider Zip predicted transactions in the United States would rise by more than 30 per cent in the 2025 financial year as it signs up more payment providers, making it easier for US retailers to accept it.

Zip CEO Cynthia Scott. “We reinforced our position as a strong, simplified and profitable business.” Kate Geraghty

The consumer lender, whose share price is up 240 per cent in 2024, plans to nab market share for “pay in four” instalments from Block-owned Afterpay, Affirm and Klarna.

It will add a new “pay in 8” option in the US, and a competitive virtual credit card known as Zip Plus in Australia. It has new partnerships with Stripe and Adyen to provide Zip to merchants.

Zip chief executive Cynthia Scott told The Australian Financial Review that Apple was a “potential channel partner for us”, after the tech giant said in June it would allow iPhone users to access buy now, pay later directly through Apple Pay, and partnered with Affirm. Zip told brokers at a post-results briefing it was talking to Apple.

Zip is also eyeing a plan to link customers to home loans, describing this as an “obvious adjacency”.

Cash earnings of $69 million for the 2024 financial year came in at the top end of its guidance range, turning around a $48 million loss, and marking the first year Zip reported a net profit. Revenue of $868 million was up 28 per cent year-on-year, as it delivered four consecutive quarters of profitability and transactions surged 39.5 per cent to $6.5 billion in its No. 1 market, the US.

But as Zip pulled back on lending to more risky customers, given economic challenges, transactions fell in Australia and New Zealand where volumes tumbled by 14.5 per cent to $3.5 billion, and users slipped 5.4 per cent.

Zip shares fell 7 per cent on Tuesday to $2.11, after rallying ahead of the result. It raised $217 million in a placement last month at $1.52 apiece. This time last year, the stock was languishing at 33¢.

With the impact of higher interest rates on customers regarded as a key risk, RBC Capital Markets analyst Jack Lynch said Zip’s ability to control credit quality was positive. “Australian net bad debts as a percentage of receivables spiked in June, although, positively, this looks to have moderated in July,” he said.

Over the year to June 30, net bad debts of 1.7 per cent of transactions were down 18 basis points. Ms Scott said falling interest rates in the US would create “definite tailwinds for customers, and our own operational performance”.

Zip will compete more directly with banks in Australia with its new credit card offering, which is interest-free for balances under $1500 and carries an interest rate of 12.95 per cent on balances between $1500 and $4000, lower than the 20 per cent rate charged by most banks.

Zip’s quest for profitability was realised after co-founder Larry Diamond visited Morgan Stanley CEO James Gorman in October 2021 and received a famous warning to batten down the hatches as higher interest rates loomed. This forced Mr Diamond, and the rest of the management team now led by Ms Scott, to do an about-face and abandon a strategy of growing at any cost.