Published on the 10/08/2017 | Written by Jonathan Cotton
AU startup gets the nod from fintech-friendly banking giant…
As startups everywhere search for ways (and means) to replace dated and clunky online purchasing methods, Sydney-based fintech venture zipMoney has nabbed a lucrative strategic partnership with banking giant Westpac.
At $40m, the deal, announced this week, represents the third largest Australian raise of 2017.
The investment takes the form of almost 50,000,000 fully paid ordinary zipMoney shares at a price of $0.81 per share (with another $8m investment to come depending on performance criteria). The company says that the money will be used to finance its data science and “proprietary decisioning capabilities.”
“This investment, combined with the recent $260 million asset-backed securitisation warehouse program implemented on 25 May 2017, provides Zip with a scalable funding platform, from which to capitalise on the present market opportunity,” the company said.
Zipmoney has also agreed to appoint an additional non-executive director to be nominated by Westpac.
Likely impressed with zipMoney’s real-time data analytics and credit approval capabilities, the arrangement will see the company’s products and services integrated across Westpac’s network throughout Australia, with both companies suggesting a future focused on business-to-business products.
The deal is “serious validation of the success of the Zip platform and offering,” said Zip CEO and managing director, Larry Diamond, noting that the strategic relationship arrangement will likely deliver a significant opportunity to “accelerate the growth of our merchant network and origination volumes.”
“We look forward to welcoming Westpac onto the register and to their ongoing support in the growth of our Company.”
The fintech startup is well positioned to take advantage of consumer frustration with unpopular yet ubiquitous credit card-based online transaction systems.
“Things are changing so quickly,” Diamond said of the digital payments landscape, pointing to “the rise of millennials, increasing competition and customer demands and the question of what comes after credit cards.”
Diamond said that the product appeals to both these “new sensibilities” of the consumer and and the desire of financial institutions such as Westpac to find new ways to connect with users.
“Fintech and Zip represent a pathway to the future for the major financial players who are looking to stay ahead,” he said.
Dubbed as ‘the smarter way to pay for life’s larger purchases over time, on your terms’, the product is point-of-sale finance for online shoppers, allowing customers to access interest-free financing when buying from digital retailers.
While the company is still operating at a loss (to the tune of $7.5 million off of $17 million in revenue at the end of the 2017 financial year) it has enjoyed solid user growth over the last year, announcing “record” numbers over the June quarter with 665,000 users and $300m in transactions.
The deal is the second major banking partner for the company, having secured a $260m debt facility led by the National Australia Bank in May, in what it says is the largest fintech debt funding arrangement “in Australia’s recent history.”
Westpac has likewise been showing a new interest on partnerships – especially of the fintech variety – via its $100m VC fund ‘Reinventure’. The banking giant also invested in financial data aggregation platform Basiq in June, debt recovery tool InDebted in May and put $1m into payment middleware platform Doshii in January.