Zip Co soars as it secures Amazon payment deal

Zip Co shares have soared as the company secured a strategic agreement with Amazon.com.au.

Zip founder Peter Gray Picture: David Geraghty

Afterpay rival Zip Co has secured a strategic agreement with Amazon.com.au allowing the buy-now-pay-later platform to be made available as an option 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 $1.2bn, has two services in the market, with Zip Pay offering a credit limit of up to $1000 and Zip Money providing a line of credit for larger amounts.

With the deal making Zip the first Australian instalment payment option, company chief executive 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,” he said.

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

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

Zip shares rose 17 per cent on the news, ending yesterday’s session at $4.02.

The Amazon deal is a significant win for Zip, at a time when it is keen to differentiate ­itself from local BNPL market leader Afterpay.

Speaking before the Amazon announcement, Zip founder Peter Gray said the company’s digital wallet structure made it a good fit for working with online retailers.

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

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

Mr Gray added that 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,” he said.

“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.”

With BNPL services targeting millennial customers, Mr Gray said Zip’s target demographic was not given enough credit for its fiscal discipline.