BNPL group Zip Co pays $160m to speed up global expansion

Zip Co will pay $160m to convert minority positions in European provider Twisto Payments and UAE-based leader Spotti Holdings to full ownership.

Larry Diamond, with co-founder Peter Gray, says Zip Co is using a ‘coalition of founders’ model to expand.

“Buy now, pay later” group Zip Co will accelerate its global expansion by paying about $160 million to convert minority positions in European provider Twisto Payments and UAE-based leader Spotti Holdings to full ownership.

The deals mirror the approach used in the US, where Zip first took a minority stake in Quadpay to ensure there was a cultural fit, management alignment and suitability for integration.

Chief executive Larry Diamond said the model amounted to a “coalition of founders”, where Zip combined with strong founders who shared a similar ­vision.

“We are very much looking forward to adding (Twisto’s) strategic geography to our growing footprint and fulfilling global ­merchant demand,” Mr Diamond said. “We have been impressed by the Twisto team, their deep customer focus and product set and look forward to working closely with them to deliver on the opportunities we jointly have in front of us.”

In a similar vein, Mr Diamond said Spotti had a large, untapped opportunity to bring BNPL to emerging markets, where cash on delivery remained a “significant merchant challenge, and where the digitisation of retail accelerates”.

Announcement of the deals came as Macquarie Group released the results of a US survey which found that only 5-9 per cent of existing BNPL customers used it as their primary payment ­method.

Non-users showed little intention of signing up.

While existing customers said they planned to use the service more, and those who signed up earlier tended to have a higher frequency of transactions, the annual growth rate was quite mild.

It was also found that 70 per cent of users would prefer to sign up with a different BNPL provider rather than switch stores. “Our takeaway from this is that it is ultimately the merchant that owns the customer rather than the BNPL,” Macquarie said.

On the Zip acquisitions, Royal Bank of Canada said in a note that the company had flagged international growth opportunities in its recent $400m convertible note raising in April, so it was no surprise to see the deals even though Zip’s initial investments were only made in December last year.

“While the Twisto business has been around for a number of years, we note the Spotti business is very early stage,” RBC said.

“The attraction of Twisto in our view will be the regulatory passporting across other EU countries (still subject to regulatory consent), the product construct also being a digital wallet with instalment payment functionality and also virtual card ­issuance, and the in-region experience and team.”

Twisto, it said, was about one-tenth the size of the Afterpay unit Clearpay UK, but provided a stepping stone into a large European market which had a number of countries with providers experiencing high uptake of BNPL-style products.

Zip said the acquisitions had a combined enterprise value of $180 million and transaction consideration of $160 million, to be funded with either cash or shares at the company’s discretion.

The cost of the remaining Twisto shares was $140 million, with the licence capable of being passported to all 27 member states of the EU – an annual e-commerce market of $1.1 trillion.

More than 1 million customers had transacted on the platform, with an annual run rate of $12 million in revenue, a total transaction value of $230 million and 14,000 merchants.

Spotti, founded last year, had 650 merchants on its platform, and had exposure to one of the world’s fastest-growing e-commerce markets, expanding at an annual rate of 25 per cent.

Originally published as BNPL group Zip Co pays $160m to speed up global expansion