Zip and Amazon Sign Formative Buy Now, Pay Later Deal

On Thursday (November 7), Zip (ASX:Z1P) announced a strategic deal with Amazon (NASDAQ:AMZN), making it the first company in Australia to reach a payment deal of this kind.

With the holiday season drawing near, customers of buy now, pay later (BNPL) firm Zip will have the option to pay through instalment options on Amazon.com.au.

With a return of 265 percent year-to-date and a user base of 1.5 million, the fintech firm could find the momentum it has already experienced so far in 2019 further accelerated.

“This agreement puts Zip firmly on the main stage by allowing customers shopping on Amazon.com.au to use Zip to pay at their pace,” Larry Diamond, CEO of Zip, said in a press release.

As part of the deal, Zip has issued warrants to an unnamed Amazon affiliate to purchase Zip’s total outstanding shares.

The exercise price of the warrants is based off the price of a Zip share on October 3, which was AU$4.70.

The Amazon affiliate will be able to exercise these shares at any point within the next seven years. As of Thursday, Zip’s share price stood at AU$4.02.

Jun Bei Liu, an analyst at Tribeca Investment Partners, told the Financial Post that the deal is beneficial to both parties, saying that BNPL services can promote growth in periods of softening retail sales.

Still, rampant growth in these new payment options has attracted the attention of regulatory authorities. In June, Afterpay Touch (ASX:APT), a financial technology company, was the subject of scrutiny after a report from financial watchdog AUSTRAC called on an external auditor to investigate the company.

According to a company press release, Afterpay Touch was given a notice regarding anti-money laundering investigations.

Similarly, according to ABC.net, Afterpay Touch and Zip have received over 250 complaints combined from the Australian Financial Complaints Authority; these complaints relate to fee inaccuracies and the services having negative impacts on consumer credit ratings.

“I really think that complaint levels are the tip of the iceberg,” Gerard Brody from the Consumer Action Law Centre told ABC.

Shares of Zip opened at AU$3.69 on Wednesday (November 6) and closed at AU$4.02 on Thursday, climbing 8.94 percent.

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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.