Buy, buy, buy as pay-later giant Zip charts plans for global expansion

Aussie buy-now-pay-later company Zip Co wants to open its purse to kickstart an international expansion, announcing plans to acquire Auckland-based platform PartPay on Tuesday.

In a move that could help Zip close the gap with rival Afterpay, the company has proposed spending a maximum $84.4 million in cash and shares to acquire PartPay as well as a stake in US-based QuadPay Inc.

The deals, subject to shareholder and other third-party approvals, would see Zip step foot out of the Australian market for the first time with exposure to markets in New Zealand, South Africa, the United Kingdom and the United States.

It follows Afterpay’s prior move into the US and the UK, and comes less than a month after Commonwealth Bank invested in its own pay-later play with Swedish-headquartered Klarna.

All these decisions underline the growing prominence of the pay-later market globally, as investors line up to cash in and regulators continue to consider how to best regulate the area.

Established just over two years ago, NZ-based PartPay has grown like a sprout, with 110,000 customers on its platform and over 1,000 retailers at its disposal. PartPay also owns 24.7% of South African platform Payflex and 8.9% of New-York based QuadPay.

Including its own investment, Zip will snap up a total 15% stake in QuadPay (launched in 2018 with over 1,000 merchants) if everything goes to plan.

In a statement attached to an investor note circulated Tuesday, Zip chief executive Larry Diamond said the transaction marks the beginning of the company’s global expansion story.

“Whilst we see significant upside in the core Australian business, we feel the timing is opportune to begin investing abroad as we seek to build a global payments business,” he said.

“There is a clear and strong alignment between PartPay’s and Zip’s philosophy on responsible credit, and we look forward to working with PartPay’s highly capable management team as we grow our market share.”

For Zip, the deal provides a less risky option for international expansion given PartPay is already operational overseas and has been localised to individual markets. It also has a history of conducting full credit and ID checks, an area of considerable importance for regulators globally.

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