On Thursday (November 7), buy now pay-later (BNPL) firm Zip (ASX:Z1P) announced a strategic deal with Amazon (NASDAQ:AMZN), making Zip the first company in Australia to reach a payments deal of this kind.
Ramping up to the holiday season, Zip’s customers will now have the option to pay through installment options on Amazon.com.au.
With over 265 percent returns year-to-date and a user base to 1.5 million, the fintech firm could find the momentum it has already experienced so far in 2019 further accelerated.
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As part of the deal, Zip issued warrants to an unnamed Amazon affiliate to purchase Zip’s total outstanding shares.
The exercise price of the warrants is based off the October 3, 2019, price of Zip’s shares, which was AU$4.70.
Along with these conditions, the Amazon affiliate will be able to exercise these shares at any point within the next seven years. As of Thursday, Zip’s shares 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 following a report from financial watchdog AUSTRAC calling 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.