How Zilch Cuts Losses 79% as UK Fintech Eyes Profitability
Zilch Holdings has demonstrated the path to profitability for buy-now-pay-later platforms, cutting net losses by 79% to £10.5m (US$14.3m) while revenue climbed 93% to £110.3m (US$150.0m) in the year ended March 2025.
The London-based fintech achieved its first quarter of operating profit in July 2024, marking a watershed moment for a sector that has faced scrutiny over unsustainable business models.
The company's performance contrasts with broader challenges facing the BNPL industry, where regulatory pressure and investor concerns about credit quality have dampened growth expectations.
Zilch's early regulatory authorisation by the Financial Conduct Authority in April 2020 positions it ahead of forthcoming BNPL regulation due in 2026.
Philip Belamant, CEO and Co-founder, describes the transformation as remarkable. “It's been an extraordinary year at Zilch. We're building something powerful – empowering people with unprecedented control over their money. And it's clearly working,” he states.
The Financial Times recognised Zilch as the UK's fastest-growing fintech unicorn in its annual FT1000 report, reinforced by similar recognition from The Sunday Times Tech 100 survey.
Gross Merchandise Value rose 73% to £1.9bn (US$2.6bn) during the period, driven by both customer acquisition and deeper engagement from existing users.
The company now serves 5 million registered customers across the credit spectrum from sub-prime to prime, with average order frequency rising to 57 transactions per customer annually from 51.5 in the previous year.
Merchant-subsidised model drives margin expansion
Zilch's business model differentiates it from traditional BNPL providers by subsidising credit costs through merchant commissions rather than relying solely on consumer fees or late payment charges.
This approach has enabled gross profit margins to expand to 49% from 39% in the previous year, demonstrating the scalability of the platform.
Revenue take rate increased to 6.08% from 5.44% as merchants pay performance-based affiliate commissions and advertising fees for premium placement within Zilch's app.
The company's direct-to-consumer model creates high-intent customer traffic that delivers conversion rates beyond traditional digital advertising, according to the annual report.
The introduction of Pay over 3 months in spring 2024 has gained traction, representing 14% of total volume and commanding higher average fees per transaction.
This longer-duration offering results in stronger purchase journeys via the app, allowing customers to benefit from subsidised transactions while generating higher revenues for Zilch.
Administrative expenses increased just 7% to £59.7m (US$81.2m) despite substantial volume growth, falling from 97% of revenue to 54%. This demonstrates the operating leverage inherent in Zilch's platform as fixed costs spread across higher transaction volumes.
Deutsche Bank facility triples funding capacity
Zilch completed a transformative refinancing in June 2024, securing a £150m (US$204.0m) debt securitisation facility led by Deutsche Bank alongside two credit funds.
The arrangement replaced a previous £50m (US$68.0m) facility with Goldman Sachs Asset Management and provides substantially enhanced funding capacity to support growth ambitions.
The new facility tripled available committed capacity and offers improved commercial terms, reflecting increased institutional confidence in Zilch's credit performance and business model sustainability.
The securitisation structure supports approximately £3bn (US$4.1bn) of annual origination volume through the fast-turning nature of the company's receivables book.
Lower funding costs contributed to gross margin expansion, with interest expenses relative to revenue improving by one-third.
The company went live with a dual-acquirer strategy during the year, providing greater technical redundancy while negotiating better terms with infrastructure suppliers as transaction volumes qualified Zilch as a preferred customer.
Customer engagement metrics reinforced the platform's growing importance in users' financial lives.
Annual spend per customer increased 27% to £2,369 (US$3,222), reflecting deeper wallet penetration as customers adopt Zilch as their primary payment method. The company recorded its largest month of trade in December 2024, exceeding £200m (US$272.0m) GMV.
AI integration and strategic partnerships
Technology investments have focused on artificial intelligence to drive operational efficiency while maintaining service quality.
Zilch implemented AI-driven workflows at the end of fiscal 2025 to boost customer issue resolution without sacrificing personal interaction, helping control customer service costs despite rising transaction volumes.
The platform provides 100% quality assurance through AI adoption, enhancing protection for vulnerable customers and boosting retention rates.
Underwriting processes now integrate credit bureau data, open-banking information and proprietary event-driven insights, enabling faster credit decisions whilst increasing new customers' first-month GMV by 27% year-over-year with similar loss rates.
Partnerships with Amazon Web Services, NVIDIA and other technology providers accelerate AI adoption across operations.
The company is developing an agentic commerce solution for customers, though specific launch timelines were not disclosed.
Zilch transitioned from Mastercard to a multi-year strategic partnership with Visa in spring 2024, expanding acceptance to over 150 million merchants worldwide.
The company plans to launch its first physical Visa card in the UK in September 2025, positioning the platform for increased wallet share and usage frequency across channels.
Product expansion includes Zilch Travel through a partnership with lastminute.com, enabling customers to book flights and holidays while earning rewards or spreading costs fee-free.
Zilch Compare helps customers find better insurance deals integrated into the platform's ecosystem, demonstrating the company's evolution beyond pure payment services.
Governance strengthening ahead of potential listing
Corporate governance improvements included the appointment of Mark Wilson as an independent non-executive director in August 2024.
Wilson brings experience as former CEO of AIA and Aviva and serves as a current main board member at BlackRock, providing expertise to guide the company toward sustained profitability and potential public listing.
The company restructured its corporate organisation in April 2024, with Zilch Holdings Limited becoming the ultimate parent through a share-for-share exchange. This change supports long-term strategic goals while implementing a robust corporate governance framework to manage operations as the business scales.
Credit losses relative to GMV increased marginally to 1.5% from 1.2%, primarily reflecting increased new customer onboarding over the previous 18 months.
The company maintained underwriting discipline while expanding volume, with stronger gross profit margins enabling adjustments to capture more profitable business within internal risk limits.
Belamant expresses confidence in the company's trajectory as it approaches a potential transition to public markets. “We remain focused on disciplined execution and long-term value creation as we enter the next chapter of our journey,” he concludes.