Westpac just invested $40 million in ZipMoney in the biggest Australian fintech raise of the year

ZipMoney co-founders Peter Gray and Larry Diamond. (Source: supplied)

Sydney fintech startup ZipMoney has landed a $40 million investment from Westpac.

The round, announced on the ASX on Monday morning, includes $40 million cash upfront and a further $8 million in future performance-dependent funding.

ZipMoney’s deal immediately becomes the third largest capital raising in the Australian tech sector this year, behind online conveyancer PEXA’s $64.7 million and Saluda Medical’s $53 million.

ZipMoney operates a “buy now, pay later, no interest” service — integrating into online retail stores to reach consumers. The business’ IP is in the artificial intelligence and big data technologies that drive its credit and fraud decision engine.

Westpac’s investment is the second involvement from a Big Four bank for the payment tech startup, after it revealed a new National Australia Bank-led $260 million debt facility in May that was the largest of its kind in Australian fintech history.

According to ZipMoney, the new Westpac relationship would go “both ways” with the fintech gaining access to the bank’s customer base and exploring “the integration of Zip’s products and service across Westpac’s network throughout Australia”.

The Sydney startup stated that the June quarter saw “record” results, with the user population reaching 665,000 and more than $300 million in transaction volume through the platform.

“Zip will benefit from Westpac’s expertise, its 200-year history and the power of its distribution capability to help fuel our growth,” said ZipMoney co-founder Larry Diamond.

“Things are changing so quickly. The rise of millennials, increasing competition and customer demands and the question of what comes after credit cards… Zip products are a way to access new markets, new sensibilities and new ways of connecting with users.”

Zipmoney shares were up 7% on Monday morning to $0.71.

The publicly listed company reported that it raked in $5.6 million of revenue for the June quarter and $17 million for the year. Transactions increased by 59% during the quarter, with customer numbers going up by 52%.

The arrears rate was at 2.97% and bad debts were 1.87%, both rates that are “well below” industry standards, according to ZipMoney.

ZipMoney also has personal budgeting app Pocketbook under its umbrella, after a $7.5 million acquisition last September that was claimed to be Australia’s first fintech-to-fintech merger. Pocketbook itself reached 365,000 users during the June quarter.

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