News of the arrangement triggered a 24.1 percent surge in Zip’s share price, its biggest increase in almost two years. The deal also gives Zip a competitive edge in the congested but thriving BNPL space.
Under the agreement, an Amazon affiliate will have a seven-year option of buying up to 14.6 million of Zip’s shares at a fixed price.
Tribeca Investment Partners portfolio manager Jun Bei Liu told Reuters that BNPL services have a “very strong purpose, particularly in a slower retail environment.” She called the deal a positive move for both companies.
Younger shoppers have especially taken to BNPL since there is no interest. BNPL firms like Zip earn revenue from vendor payments and late-pay fees.
The popularity of the BNPL space, however, has prompted the Reserve Bank of Australia and other regulators to closely examine the sector.
The closest competitor to Zip — Afterpay — was asked by Australia’s financial crime regulator AUSTRAC to submit an external audit after being accused of skirting money-laundering and counter-terrorism laws.
Zip, founded by Larry Diamond and Peter Gray in 2013 as Zip Money, recently acquired installments firm PartPay and SME lender Spotcap Australian, according to the Sydney Morning Herald.
Merchants of all types are racing to gain an edge to increase holiday sales and are increasingly turning to new BNPL solutions at the point of sale (POS). It looks certain that in the first year of the new decade, online installments will play an even bigger role in commerce and digital payments.
One way for providers to stand out from others is to offer bundled services to merchants who are generally always on the hunt for more effective payment options. More payment options serve not only to attract new customers but tend to spark increased sales.
In particular, being able to tailor payment options across a spectrum of categories and purchase amounts boosts conversion odds.