(Reuters) – Australian buy now, pay later company Zip Co Ltd said on Wednesday it would raise fees for customers and merchants, as it tries to weather an onslaught from soaring inflation and rising interest rates on its business.
The company‘s shares have cratered by almost 90% this year as higher rates and reduced consumer spending have pushed up the industry‘s funding costs, while tighter regulation has made for trickier credit conditions.
Zip said it was well placed to offset the effects of rising rates through measures “including consumer fee increases, merchant repricing, increased customer repayment velocity”.
It aims for over A$30 million ($20.8 million) in benefit to profit from the initiatives, and said it would continue to review capital allocation for its Rest of World (RoW) businesses, which include Canada, Czech Republic and Mexico.
Zip’s shares, which are on track for their worst annual performance since debuting in 2009, closed at their lowest since April 2016 in a broadly weaker market, while U.S.-based Sezzle, which Zip plans to buy for $350 million, dropped almost 9%.
It said it had A$303 million in cash and liquidity as of March-end, which it expected would see it through to cash flow breakeven in 2024.
($1 = 1.4472 Australian dollars)
(Reporting by Upasana Singh in Bengaluru; Editing by Anil D’Silva)