Buy Now, Pay Later zips into Amazon

Last Thursday, retail giant Amazon partnered with Zip Co. to finally open its doors to ‘buy now, pay later’ (BNPL) technology. Zip Co., the main rival of Afterpay, now allows Amazon’s Australian customers to pay for goods post-purchase without a credit card. The deal has come at an opportune time in the lead-up to the Christmas period, as well as the upcoming Black Friday and Cyber Monday online shopping season. 

While Zip Co. currently sits second to Afterpay in terms of market share,  the deal with Amazon now gives it a competitive edge in the congested BNPL space.  News of the agreement triggered a 24.1% surge in Zip Co.’s share price – the biggest increase in two years. The agreement is set to benefit Amazon too, potentially resulting in Amazon holding 4% of Zip Co. 

However, it would seem that Afterpay aren’t willing to give up their top spot quite yet. Today Afterpay announced their new partnership with eBay Australia and will be providing customers will BNPL payment options in 2020. 

There has been rapid up-take in ‘buy now, pay later’ across the Australian market, for both in-store and online customers. There are now 1.95 million Australian BNPL users, with the 15-34 age group making up 55.9% of the market. It is a popular alternative to credit cards, resulting in a 3% decline of Australian credit card holders this year. 

In the past few months, the media have repeatedly warned Afterpay users that debts to the digital payment platform could place them under high scrutiny when applying for home loans. Some publications went so far to say that people should avoid using Afterpay if they want a home loan. But it could be argued that credit card loans are no different and that consumers have the right to choose their own credit options.  

Nonetheless, the negative press potentially played a role in Afterpay experiencing a fall in share prices and overall trader confidence. Market analysts recommended traders sell as Afterpay shares lost 7% of their value in mid-October. 

Zip Co., however, does not appear to be experiencing the same pressure. While the share prices have stabilised around $3.90, its alliance with Amazon, a multi-billion dollar brand, could make the company more resilient to market fluctuations than its primary competitor.