Larry Diamond likes to tell the story of an early customer of Zip, a Buy Now, Pay Later (BNPL) installment payment service he co-founded in 2013. The story starts that year when a customer in Australia purchased a bike for her son for Christmas. She goes to a hipster bike shop in Sydney that has partnered with Zip.
“It’s a busy time. There’s a lot of financial pressure buying gifts for friends and family, and when she came to checkout, she really had three options,” he said. Those options included paying with her credit card, her debit card, or using Zip’s Buy Now, Pay Later service with a little extra time to pay back.
“When she clicked us, we really knew that we had this wonderful triple win,” said Diamond. “It was a win for the merchant who was able to acquire a new and loyal customer. It was a win for the customer who was able to budget responsibly over that period until she started earning a bit more money. It was a win for us because we were able to acquire a customer in this geography.”
Here, we chat with Diamond about the BNPL opportunity in the U.S., Zip’s culture of velocity mindset and expanding Zip’s footprint with Visa.
How is Zip changing the traditional credit card model?
Larry Diamond: Credit card balances have hit north of $1.1 trillion.¹ Buy Now Pay Later has so many built-in responsible attributes. It encourages a much faster payback over one or two pay cycles, so you don't end up with high revolving high-interest balances. When you sign up, you agree to a payment plan of four or eight equal interest-free installments. We also don't rely on just FICO. We use alternative data to understand our customers. As an app, we have this great engagement model too.
What makes Zip unique from its competitors?
Diamond: We're investing a lot in alternative data so that we really can understand the customer. We look at credit data and, we look at performance data in our apps.
How has Visa helped you grow your business?
Diamond: Visa has really been a fantastic partner for us. The challenge for us was we weren't ubiquitous. One of the biggest pieces of feedback was that we'd love to use Zip, but you're not available at every checkout. We very quickly realized we needed to be part of the open world of payments. And that's really where we connected with Visa to start issuing a physical Zip card (via WebBank), which enables customers to use Zip pretty much anywhere Visa is accepted. They've been a wonderful enabler for us to expand our footprint across the world.
What do you want consumers to understand about BNPL?
Diamond: BNPL is like credit with training wheels. I think it encourages healthy attributes and character traits out the gate as you go on the journey of financial development.
What do you wish you knew when you started Zip that you know now?
Diamond: When we first started, the industry was very focused on one payment method, so we can move through checkout with ease. What we've seen instead is really a proliferation of payment methods at checkout. From a people perspective, understanding who to hire at every part of the journey is the trick. When there's four of you in a garage, you don't necessarily need someone who has run a 1000-person organization, so understanding the different skills and capabilities, and to be honest, expertise that we need around the table at different stages would've been helpful.
How would you describe the culture at Zip?
Diamond: We advocate for brutal transparency and what we call Zip Back, or rapid, fast, fair and transparent feedback. We move quickly and try to codify an engineer into all of our practices, this sort of velocity mindset. I think it’s a lot of trust investing in management and decentralizing decision making, so the system can ultimately take care of itself over time. We have a long way to go. I think if we zig where others zag, we can solve problems quickly and that compounds over time.
What excites you the most about the future of payments?
Diamond: BNPL is now becoming more mainstream, but it's still very early on in the cycle of adoption. In some of the more mature markets [such as Brazil²], BNPL can represent up to 50 percent of an online checkout. In America, we're still talking single digits, so the opportunity is significant, particularly as more and more of the market understands and appreciates this product. I see a world where Zip is a household name, trusted by tens of millions of Americans as their primary payment method and really making a difference in the lives of these customers to help them budget and save.
- Federal Reserve Bank of New York. Household Debit and Credit Report. Retrieved Oct. 22, 2024, from https://www.newyorkfed.org/microeconomics/hhdc
- Visa Navigate. “Rise of installments fueled by digital-first consumers.” Retrieved Oct. 22, 2024, from https://navigate.visa.com/na/spending-insights/rise-of-installments-fueled-by-digital-first-consumers/