Zip Co lands Amazon.com.au buy now pay later deal

Afterpay rival Zip Co has secured a strategic agreement with Amazon.com that includes options on an equity stake.

Peter Gray from Zip Co. Picture: David Geraghty.

Afterpay rival Zip Co has secured a strategic agreement with Amazon.com.au which will see the buy now pay later (BNPL) platform made available as a payment platform for consumers.

Under the agreement, consumers will be able to use Zip Pay and Zip Money to pay for goods purchased on Amazon.com.au.

Zip, valued at $1.2 billion, has two services in the market, with Zip Pay offering a credit limit of up to $1,000 and Zip Money providing a line of credit for larger amounts.

With the deal making Zip the first Australian instalment payment option, company CEO and managing director Larry Diamond hailed it as a major milestone.

“This agreement puts Zip firmly on the main stage by allowing customers shopping on Amazon.com.au to use Zip and pay at their own pace.”

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“The agreement delivers a fantastic experience for customers who are looking to own the way they pay,” he said.

Under the agreement, Zip will also issue warrants to an Amazon affiliate for 14.6m ordinary shares, giving it the option to buy the shares priced at $4.70 within seven years.

Zip shares last traded at $3.44, having peaked at $5.44 last month.

The Amazon deal is a significant feather in the cap for Zip, at a time when it’s keen to differentiate itself from local BNPL market leader Afterpay.

Speaking to The Australian on Wednesday prior to the Amazon announcment, Zip founder Peter Gray said the company’s digital wallet structure made it a good fit for working with an online retailers.

“We can sit very easily at the checkout and can easily become a default payment option. So we are very complimentary with that marketplace model,” he said.

Zip is already available at local online retailer Kogan.com’s platform.

‘Service any business’

Mr Gray added he was confident that BNPL would over time become available to consumers for a host of services.

“It all comes down to the underwriting standards that BNPL providers offer and if we do that right we can offer the service to any business.”

“I think our service can replace credit cards at every vertical, our rivals can’t always do that.”

“Credit cards are falling out of favour, the days of high interest balances being carried on credit cards is over, I am not sure banks quite understand that,” he said.

With BNPL services targeting millennial customers, Mr Gray added that Zip’s target demographic isn’t given enough credit when it comes to fiscal discipline.

“One in six credit card customers is late but one in a 100 Zip customers is late. And Millennial consumers are quite savvy, they know the difference between a good deal and a bad deal.”