Gray, a 25-year veteran of the credit industry and CEO of Zip, co-founded Zip with CEO Larry Diamond in 2013. Sydneysider, married with two daughters, is also a horse racing enthusiast and owner of several racehorses. It has a stake of just over 3 per cent Zip and is one of the big winners of Australia’s BNPL sector growth.
In Australia, which Gray says is possibly the most “mature” BNPL market in the world, Zip has close to 2.5 million customers and is thinking of other financial services it could provide to this mostly younger cohort. So far it has offered commercial loans and BNPL, but has marked the possibility of offering cryptocurrency savings accounts, stock trading or high returns.
The rapid growth of the sector has led to a growing battle with banks, with the Commonwealth Bank launching its own BNPL service as part of its commitment to maintaining dominance with young customers. Gray argues that there is still a lot of internal growth to be had, including the deployment of BNPL in traditional bricks and mortars, and is despised by the lack of innovation in the banking sector.
“At a high level, they [banks] they all fight and have been sleeping behind the wheel to some extent to engage with younger customers who listen to what they want and market trends, ”he says.
For investors, however, it is the growth potential abroad that is most exciting.
Tribeca Investment Partners portfolio manager Jun Bei Liu, a shareholder in Zip and Afterpay, says there is a “huge” urgency for overseas expansion and Zip is keeping a good pace with its bigger rivals. “They don’t necessarily take anyone’s part, but they keep the pace of growth,” he says.
However, making forays into new regions outside the major Western markets of North America, the United Kingdom and Europe could be more difficult.
Morningstar analyst Shaun Ler says regions like Asia, South America or Russia would be harder to introduce because of a tougher regulatory environment. That said, he says the strategy of pursuing rapid growth abroad is right for Zip, because if they don’t move in those markets, someone will.
“Much of the land grab will take place over the next 6 to 18 months. That’s when you have to grow, ”says Ler.
So where can Zip go next? It has a team looking for opportunities and has recently made a strategic investment in Philippine operator TendoPay. When Gray is asked about Asia as a prospect, he points to that investment and says the company is “certainly very interested” in other potential opportunities.
But for now, the US is the main game.
Sometime this half, the revenue of its US business Quadpay will exceed the revenue of Australia, which is likely to raise even more questions about a possible listing in the United States, as pursued by Afterpay. Gray says a potential Nasdaq listing or a dual listing “marks quite a few squares” and could help with its valuation, but stresses that it is only soon when this option is raised.
“A growing percentage of our business will be based in the US. Therefore, having a lot of exposure to this change will give us access to a wider set of American investors who potentially value the business in different ways in other markets. it makes a lot of sense, ”he says.
Amid all the focus on growth, the company is still unprofitable and skeptics warn that current high valuations underestimate Zip’s future capital needs, and competition risks and tighter regulation.
But Zip has enjoyed an impressive change of fortune. Gray recalls that this time last year, the company was forced to lay off about 20 percent of its staff and “was really looking at the unknown.” Since then, the share price has nearly quadrupled, made a transformative change in the United States, and the workforce has doubled to about 700.
“It’s definitely been a pretty crazy 12 months,” he says. “The fact that the company has proven to be so resilient and not only resilient, but we’ve been able to complete some acquisitions successfully and expand during that period, is pretty crazy.”
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