November 28, 2022

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The industry has lost billions on the stock market in recent times and players are now scrambling to stem the losses by shutting things down.

Australian buy now, pay later provider Zip Co is closing its money management app that it acquired for $7.5 million as the embattled sector struggles with ballooning bad debts, rising interest rates and harsher regulations.

The app, called Pocketbook, was acquired in 2016 and reportedly has 800,000 users but is being shuttered by Zip as part of significant changes to the company’s operating environment, it said.

“Zip’s operating environment has changed significantly in the last few months and as a result we have adapted our strategy accordingly in order to accelerate our path to global profitability,” said Zip’s chief product officer Travis Tyler.

“With this in mind, Zip has decided to close the Pocketbook app in order to reprioritise resources and focus on delivering sustainable profitability in our core ANZ market.”

Pocketbook was founded 10 years ago by Sydney-based founders Bosco Tan and Alvin Singh and offered a free budget planner and personal finance services.

The company said it would reimagine and rollout some of the features from Pocketbook, which is due to be shut down on August 5, into the Zip app.

All personal data provided by users will be deleted once its closed, including names, email addresses, mobile numbers, and personally identifiable account and transaction details, it added.

It comes as Zip’s shares have fallen more than 93 per cent in the past year. The BNPL player’s shares are currently trading at 51c, compared to $14.53 back in May last year.

Zip reported an 89 per cent increase in revenue through the first half, although it still posted losses of $172.7 million.

Yet, total cash available fell 19 per cent to $266.8 million for the six months to the end of December with the closure of Pocketbook seen as part of a range of cash-preserving measures.

It previously had a market capitalisation of about $6 billion – which was more than retailer JB Hi-Fi – but this has since plummeted to around $600 million, a staggering 87 per cent decline in the share price compared to 2021.

Experts have previously predicted potential “carnage” for the buy now, pay later sector as providers burn through cash, bad debts balloon and customers retreat from using the service – a model which they say isn’t sustainable.

More pain is also headed Australian BNPL providers’ way with Financial Services Minister Stephen Jones indicating that the sector would be regulated similarly to credit products by mid-2022, a change consumer advocate groups have been campaigning on.

The BNPL sector has been haemorrhaging money with the Australian sector losing a whopping $1.05 billion in 2021, which has left investors concerned and has seen share prices dive this year.

Many companies in the BNPL sector have only managed to stay afloat after partnering with larger entities.

Afterpay, for instance, underwent a $39 billion merger last year with US-based Block, run by Twitter founder Jack Dorsey.

In February, Australian lending company Latitude Group joined forces with another Australian BNPL, Humm, for $35 million cash and 150 million Latitude shares worth $335 million at the time of the announcement.

Then there’s US firm Sezzle which is due to merge with Australia’s Zip for the third quarter of this year.

However, the deal could be in jeopardy after Sezzle’s share price plunged to new lows, leaving only $35.4 million of the CEO’s $800 million fortune last month.

Other providers have been slashing costs by dramatically reducing their workforce.

Back in May a buy now, pay later provider with offices in Sydney called BizPay made 30 per cent of its workforce redundant blaming market conditions for the huge cut to staffing.

Another Australian buy now, pay later provider called Brighte that offers money for home improvements and solar power fired 15 per cent of its staff in June.

Originally published as BNPL provider Zip closes $7.5m money app Pocketbook

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