Any way you slice it, 2017 has been a blockbuster year for zipMoney. The Sydney-based fintech startup – a provider of point-of-sale credit and digital payment services – has been onboarding around 1200 new customers per day, with CEO Larry Diamond attributing this growth to traction with millennials.
Significantly, Zip landed the two largest fintech deals of the year. After securing a $260m debt facility, including $200 million in funding from NAB, four months ago, the startup attracted a $40m equity investment from Westpac in August.
Diamond, who co-founded Zip with company director Peter Gray in June 2013, spoke to Dynamic Business about his mission, the benefits of collaboration between fintechs and big banks, the personal challenges of leading a ‘hyper growth’ business and the long-term goal of becoming a ‘product house’.
DB: What is the problem you address, your motivation for doing so and your method?
Diamond: I’ll break it down…
PROBLEM: We believed the old way of doing retail finance was broken. The old way suffered from hard sign ups, lack of flexibility and high interest rates that ripped consumers off. Millennials – and almost everyone else – are wising up and know that there has to be a better way.
MOTIVATION: We saw the need for transparency and openness when dealing with consumers. We don’t often give them the credit they deserve (pardon the pun!).
METHOD: We offer an interest-free digital wallet that allows consumers to shop seamlessly and responsibly, both online and in-store. This not only helps consumers, it also helps retailers, too, driving engagement, conversion, and larger baskets. We have pioneered payments as a powerful marketing tool, and that’s a very strong value prop.
DB: Reflecting on your AB and Westpac partnerships, is it imperative for…
- big banks to partner with fintech startups to stay ahead; and
- fintech startups to leverage big bank resources to stay ahead?
Diamond: We are re-imagining and re-inventing finance for everyone, but we love to partner with banks wherever it makes sense. As the past few months have shown, I think we are fortunate that banks are realising that collaboration with fintech works, and the benefits flow both ways. Fintechs can learn from literally hundreds of years of financial market experience that the banks have and banks can learn new things about engagement and how to reach the consumer – something that is increasingly difficult for them.
DB: What have been the key moments in your journey with Zip to date?
Diamond: I’ve boiled it down to five moments, going right back to the start…
- Having my first meeting with Peter at the Commodore Hotel in North Sydney and drawing up the plans together on butcher paper – although Zip was just an idea, a bond was formed.
- Convincing our early investors to fund the original loan book – we had no history or track record to go off but they had belief in the team.
- Landing our first customer, Chappelli Cycles, in December 2013 – we still have one of their bikes in our office!
- Listing on the ASX in September 2015 – ASX is a great platform for funding early-stage tech and definitely a move that changed the trajectory of Zip. We certainly wouldn’t be the size we are today without this boost of capital.
- Our acquisition of personal finance app Pocketbook (more like a merger) in September 2016 – there are a trillion dollars of payments and a trillion dollars of savings. Together we can wrap smart financial services around the consumer.
- Now and the near future – timing is so important. Right now, we are in an age of bipartisan support for the emergence of fintechs with the regulators coming to the party.
DB: Big partnerships and signs-ups aside, what else does success look like?
Diamond: We’ve established strong partnership channels (50+ including Neto, Shopify & eWAY) and we’re supporting more than 5,000 retailers by decreasing drop-offs, increasing conversions by 30% and increasing customer average spend per transaction by up to 80% with no material impact on returns, all for competitive merchant rates. Importantly, consumer bad debt ratio is well below industry averages at 1.9%, which supports Zip’s disciplined user-centred and responsible approach to consumer finance as well as the power of our unique CreditTech and DecisionTech IP.
DB: What have been the major challenges of steering a growing fintech?
Diamond: Our biggest challenge – and this was both personal and team-wide – was moving from the small, close-knit team where everyone knows everything to a larger, more structured organisation. Building the right internal comms and culture has been our top priority, ensuring we can scale efficiently and continue to retain the internal organisational IP. Dealing with hyper growth can be incredibly chaotic and, while the future is unpredictable, it’s been critical to think ahead in terms of how we scale, build redundancy, grow customer care teams. For me personally, being the CEO and driving force of an organisation for the first time has certainly been an exciting personal challenge for me.
DB: What will you be doing to ensure the future success of zipMoney?
Diamond: We are on a mission to give consumers fair and transparent options when it comes to payments and control of their finances – and everything we do needs to support this mission.
We’re focusing on ensuring that we have the right operating rhythm internally and will continue to invest in product, tech and data science. We see ourselves, long term, as being a product house, so this means ensuring we have the right team, right agility, right cadence and the curiosity to continually question.
We need to fundamentally ensure the internal organisational culture remains potent and we need to make sure we build a strong feedback loop so that we never stop listening to our consumers and taking action on what we learn. Our products will evolve from the deep knowledge of our incredible team and meeting our consumers where they tell us they need Zip most.
And of course, hard, hard work.
Related: Westpac invests $40 million in startup zipMoney and How fintech lender zipMoney boosted retail sales by 20 per cent.