Zip Co Ltd (ASX: Z1P) has announced the launch of Tap & Zip. Will the Zip share price go nuts?
Zip’s Tap & Zip
The buy now, pay later (BNPL) business is launching a new product instore that will enable Zip Pay users to shop “effortlessly” anywhere that accepts Visa.
According to Zip, only 13% of stores in Australia are able to accept buy now, pay later options. Tap & Zip will unlock a number of other spending categories. It will aim to capture more of that in-store opportunity.
For merchants this will help, according to Zip, attract new customers, lead to bigger basket values and more sales volumes.
For customers it will mean they can use Zip Pay to shop everywhere and pay later, always interest-free. Customers will be able to keep using Zip’s existing in-store solutions if that’s the preferred method.
Zip’s existing in-store payment experience is based on barcode and QR technology , which relies on complex point of sale integrations. Zip thinks Aussies love the tapping experience and prefer it. With 24% of Zip’s transactions occuring in physical stores, compared to 87% of actual payments being physically instore for the broader economy, Zip sees an opportunity for growth.
To make this happen, Zip has been granted a ‘Principal Issuer’ license with Visa. It will leverage Marqeta’s card-issuing platform to create Zip-branded virtual cards instantly. The virtual card can be used to shop at any store or online retailer where Visa is accepted and then added to digital wallets. Zip will earn interchange revenue on transaction volume processed on its cards.
Management comments
Zip CEO and co-founder Larry Diamond said: “BNPL has seen phenomenal growth over the last few years, as customers switched traditional forms of credit for flexible, digital alternatives. However, until now that growth has been restricted by a clunky instore checkout experience and limited acceptance.
“This is a huge day for Zip and the Australian retail sector. Tap & Zip is a new way for customers to pay that will dramatically increase instore transactions and conversion rates for thousands of retailers and merchants around the country, many of whom have been significantly impacted over the past year. Tap & Zip marks the future of BNPL: flexible and transparent payment options that are accepted everywhere.”
Summary
As part of the same announcement, Zip will offer Apple Pay and Google Pay from today.
Zip is now capable of servicing a wider customer base, and integrating into a wide part of Zip’s existing customer base’s payments.
It seems like it could be a great move by Zip. The aim of the BNPL game is to increase overall processing volume, which is exactly what this will do.
I can see why this would excite investors, it could lead to a rising share price. Is it a good buy? I’m not sure, there’s a huge amount of excitement and expectation built into the current price. There are other ASX growth shares I’d buy first such as Pushpay Holdings Ltd (ASX: PPH).