BNPL supplier Zip shuts down Pocketbook app for $7.5 million

The industry has lost billions in the stock market lately and players are now scrambling to stem the losses by closing things down.

Australian Buy Now, Pay Later provider Zip Co is shutting down its fund management app it acquired for $7.5m as the struggling sector grapples with soaring bad debts, rising interest rates and tighter regulations.

The app, called Pocketbook, was acquired in 2016 and reportedly has 800,000 users, but is being shut down by Zip amid major changes to the company’s operating environment, he said.

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

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

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 will reinvent and roll out some of the features of Pocketbook, which is due to shut down Aug. 5, into the Zip app.

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

It comes as Zip shares have fallen more than 93% in the past year. BNPL player shares are currently trading at 51c, down from $14.53 in May last year.

Zip saw an 89% increase in revenue in the first half, although it still posted losses of $172.7 million.

Still, total cash on hand fell 19% to $266.8 million for the six months to the end of December, as Pocketbook’s shutdown was seen as part of a series of cash preservation measures.

It previously had a market capitalization of around $6 billion – which was more than retailer JB Hi-Fi – but that has since dropped to around $600 million, a staggering 87% drop in share price. compared to 2021.

Experts have previously predicted potential “carnage” for the buy now, pay later industry as suppliers burn through cash, bad debts rise and customers forgo using the service – a pattern they say n is not sustainable.

More pain is also heading for Australian providers of BNPL with Financial Services Minister Stephen Jones indicating that the sector will be regulated in the same way as credit products by mid-2022, a change on which the groups of financial consumer rights campaigned.

The BNPL sector has haemorrhaged money, with the Australian sector losing $1.05 billion in 2021, which has worried investors and seen share prices plunge this year.

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

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

In February, Australian loan company Latitude Group teamed up with another Australian BNPL, Humm, for $35 million in cash and 150 million Latitude shares worth $335 million at the time of the announcement. announcement.

Then there is the American Sezzle which is expected to merge with the Australian Zip in the third quarter of this year.

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

Other vendors have cut costs by drastically reducing their workforce.

In May, a Buy Now, Pay Later provider with offices in Sydney called BizPay laid off 30% of its workforce, blaming market conditions for the huge downsizing.

Another Australian buy now, pay later supplier called Brighte, which offers cash for home improvements and solar power, laid off 15% of its staff in June.