How is inflation and the prospect of higher-for-longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
During times of inflation and in a higher-for-long interest rate environment such as we have now, we see demand for Zip’s products increase as customers seek the ability to smooth cashflows and expenses over time. For our merchants, offering Zip at checkout provides an opportunity to deliver new and repeat customers and higher order values.
In FY23 and the first quarter of 2024, Zip delivered strong profitable growth in its two core markets of Australia and New Zealand (ANZ) as well as the US, with cash transaction margin for the core business expanding, supported by higher revenue margins and improved credit performance. These results were achieved despite a significant rise in interest rates, reinforcing the increasing relevance of Zip’s products to its customers and merchants.
What level of adoption is your business currently at with the use of AI technology?
Zip already uses predictive AI across several aspects of the business and has done so since the company’s inception. Areas of strong adoption include underwriting models, real-time fraud detection, and personalisation through propensity modelling and our merchant recommendation engine. Our data and machine learning capabilities play an important role in credit decision processes, ensuring Zip’s products are fit for our customers and enabling us to safely process over 72 million transactions a year on our payments infrastructure.
In addition, we’re actively building a road map of generative AI (GenAI) opportunities and piloting a number of use cases across ANZ and the US, including in areas such as “plug and play” productivity tools and a conversation-based application that provides real-time responses to questions about Zip.
As GenAI tools gain traction and become more powerful, we’re also committed to ensuring we have the right protocols and safeguards in place across the organisation. This includes educating Zip employees on new GenAI capabilities in a safe way before launching customer and merchant-facing use cases.
Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
In designing and delivering our business strategy across our two core markets, Zip carefully balances the needs and interests of a wide range of stakeholders, including customers, investors, merchant partners, and employees.
We also consider our impact on the planet and the broader community, seeking to ensure we meet the expectations of all our stakeholders and create positive, meaningful impacts where we can.
Over the past three years, ESG has evolved to become more integrated across our business strategy and operations. We know that our commitment to areas such as diversity and inclusion, data privacy, cyber security resilience, responsible lending and financial wellbeing benefits our business objectives and contributes to our bottom line.
Another way that ESG is evolving is through the gradual introduction of mandatory reporting frameworks. Given the increasing focus by all stakeholder groups, we see benefits of measuring and reporting on progress against targets.
For example, Zip has improved transparency and accountability by publishing and reporting on our Group DEI measurable objectives (of 40 per cent women, 40 per cent men and 20 per cent of any gender at our board, executive, director/VP, and manager cohorts by FY26), gender pay equity and gender pay gap.
In FY23, representation of women at all leadership levels either increased or remained stable and we achieved 40 per cent representation of women at director/vice president level.
Representation of women on our board is currently at 60 per cent, including a female chair and a female managing director/CEO. Beyond representation, we also measure how employees of different genders experience life at Zip and seek to close any significant gaps in areas such as engagement and wellbeing.
Pleasingly, we found that the difference in employee experience, as measured by our recent employee engagement surveys, had closed between genders.
At all times, governance plays a critical role to ensure alignment of our business and stakeholders and is something Zip is firmly focused on. Our governance approach is founded on accountability, effective delegation, and robust oversight to facilitate informed decision-making.
How has your organisation’s approach to staff working from home evolved since the pandemic?
During the pandemic, Zip like other organisations needed to adapt quickly to changing circumstances, including where and how people worked.
During this time, we embraced a fully flexible approach and prioritised giving our team flexibility and choice while aiming to ensure all of our approaches were equitable and accessible no matter whether working from office, remote or a combination of both.
While the majority of our US team works remotely, in ANZ we have recently evolved our way of working to adopt a blended model which prioritises flexibility but also confirms a minimum expectation of at least two days in an office location.
Our head office move to a new, NABERS 6-star energy rating building in George St, Sydney was a deliberate choice to create an office environment that fosters team collaboration and connection.
We regularly check in with our team, including through quarterly pulse surveys, and this feedback enables us to keep evolving our practices.
Cynthia Scott is the chief executive of Zip Co