Amazon Australia has signed up buy now, pay later (BNPL) operator Zip to offer its service on the e-commerce giant's local retail website, sending shares in Zip soaring by more than 20%.
The deal with the world's biggest retailer is a massive boost for Sydney-based Zip.
As part of the deal, Amazon could end up owning around 4.2 percent of Zip, a huge vote of confidence in the Australian company's global potential.
Zip shares jumped as much as 24.1 perecnt shortly after the market open to A$4.27, their biggest intraday jump in nearly two years.
Installment-based payment options have become very popular, especially with Millennial and Gen Z shoppers, because they bypass the interest rates and many regulations associated with taking out a credit card. BNPL companies make money from vendor payments and penalty payments when shoppers are late paying back a loan.
Jun Bei Liu, a portfolio manager at Sydney-based Tribeca Investment Partners, said the deal was a win for both Zip and Amazon. BNPL services serve a "very strong purpose, particularly in a slower retail environment" by attracting customers to particular retail sites, she said.
However, the success of the BNPL sector has also brought greater regulatory scrutiny. Last month, the Reserve Bank of Australia said it planned to dig deeper into the sector next year.
Financial crime watchdog AUSTRAC earlier this year demanded an external auditor report of Afterpay Touch Group , which is seen as a bellwether of the sector, for suspected non-compliance with money-laundering and counter-terrorism financing laws.
(Reporting by Nikhil Kurian Nainan, additional reporting by Shriya Ramakrishnan in Bengaluru; editing by Jane Wardell)