Westpac’s $40m investment sends ZipMoney soaring

Shares in start-up ZipMoney surged 19 per cent yesterday after it secured a $40 million investment from Westpac.

ZipMoney co-founder Larry Diamond.

Shares in start-up ZipMoney surged 19 per cent yesterday after the company secured a $40 million investment from Westpac, with CEO Larry Diamond describing it as a “coming of age” for fintech.

“The deal with Westpac, and the one we did a few months ago with NAB, shows that banks are excited to partner with fintechs. There’s a genuine alignment around bringing exciting products and services to consumers and partnering where it makes sense,” Mr Diamond told The Australian.

The deal is the largest direct investment by an Australian bank in a local fintech, and comes after Sydney-based Zip secured a $260m financing deal with National Australia Bank in May.

“We want to continue to roll out new products and services and this capital is really going to help us accelerate that,” Mr Diamond said.

The start-up, founded in 2013, operates a “buy now, pay later, interest-free” service that offers an alternative to the traditional credit card. It has a user base of 665,000, with 1500 new customers joining the platform every day.

“We’re tackling the consumer from both sides of the equation with our products ZipMoney and Pocketbook. We see a wonderful opportunity, with bank support and bipartisan government support across all facets of the financial ecosystem, so we really just want to double down and continue to grow our brands in the market.”

Under the terms of the deal with Westpac, the bank will get 49.4 million shares at 81c a share, a 14.1 per cent premium to Friday’s closing price of 71c. At the close yesterday the shares were up 12.7 per cent to 80c.

web version of Zip Money share price

Westpac will also get 9.8 million performance options, subject to revenue hurdles, that can be exercised for an additional $8m.

As well as the equity investment, Zip and Westpac have entered into a strategic relationship that could see the banking giant adopt Zip’s technology to make real-time credit decisions.

“They like our live data. We utilise conventional and non-conventional data around our credit tech and our decision tech that really allows us to deliver real time credit decisions in a way that’s very different to how the banks are doing it and that technology is very exciting,” Mr Diamond told The Australian.

Westpac could also use Zip’s technology to offer alternative payments across its network of terminals, Mr Diamond said, while the “valuable infrastructure” the big four banks were sitting on provided “a great opportunity to partner across a range of assets”.

Meanwhile, Zip’s chief of growth and innovation, Andy Mitchell, expects the other big banks may soon follow Westpac and NAB’s lead, and seek out investments in the fintech space.

“As some of these deals come to the fore I think we’ll see the other banks, and even the tier-two banks starting to get more involved,” Mr Mitchell told The Australian.