Its about targeting the right consumers obviously.Opportunities...

Originally posted by Goodfella58

The U.S. Now Has:

1. Record $17.7 trillion in household debt

2. Record $12.4 trillion in mortgages

3. Record $1.6 trillion in auto loans

4. Near record $1.6 trillion in student loans

5. Near record $1.1 trillion in credit card debt

Total mortgage debt is more than double the 2006 peak and total credit card debt is up ~50% since 2020.

In Q1 2024 alone, ~9% of credit card balances and 8% of auto loans (annualized) transitioned into delinquency.

Higher rates are taking their toll on consumers with record high debt balances.

How much longer can consumers hold on?

Its about targeting the right consumers obviously.

Opportunities in a Large Market: The U.S. consumer credit market is vast, providing Zip with the opportunity to target specific, creditworthy segments for growth. By focusing on responsible lending and selective customer acquisition, Zip can achieve significant growth while limiting exposure to higher-risk consumers.

Strong Financial Performance and Growth: Despite macroeconomic challenges, Zip has reported significant growth. In 3Q FY24, Zip's Americas segment saw a 43.6% increase in transaction volume and a 49.2% rise in revenue compared to 3Q23. This robust performance indicates that Zip's business model remains resilient and effective.

Effective Risk Management and Low Bad Debts: Zip's U.S. operations have maintained low bad debt rates, with monthly cohort loss rates around 1.3% of total transaction volume. This reflects Zip's effective risk management strategies, which mitigate the impact of rising delinquency rates in the broader credit market.

Healthy Liquidity and Funding Position: As of March 31, 2024, Zip reported $327.2 million in total cash and $95.2 million in available cash and liquidity, demonstrating its strong liquidity position. Additionally, Zip has significant undrawn funding facilities in both the U.S. and Australia, providing ample headroom for future growth.

Continued Margin Expansion: Zip's revenue margin improved to 9.1% in 3Q24 from 8.3% in 3Q23, and the cash transaction margin increased to 3.9% from 2.9%. This margin expansion highlights Zip's operational efficiency and its ability to generate higher returns even in a challenging economic environment.

Commitment to Responsible Lending: Zip's adherence to responsible lending practices, including identity, affordability, and credit checks, ensures a more secure credit portfolio. This commitment reduces the likelihood of significant increases in bad debts, unlike other credit segments facing higher delinquency rates.