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Zip Co Acquires QuadPay as Buy Now, Pay Later Market Heats Up

Australia-based installment payments platform Zip Co has acquired fellow buy now, pay later platform QuadPay for $269 million. Subject to shareholder approval, the deal comes a year after Zip Co increased its stake in the U.S.-based QuadPay to 14 percent, and further cements its presence in the U.S.

The acquisition will mean the formation of one global payments company and expands the pair’s combined reach to more than 3.5 million customers and 26,000 merchant partners worldwide. Zip Co and QuadPay anticipate generating a combined annualized gross merchandise value of roughly $2 billion and revenue of $167 million for the 2020 calendar year.

While interest-free installment payments remains in its growth stage in the U.S., the technology has caught on outside the country, particularly in Europe and Australia. Australia has been a hotbed for buy now, pay later players, with companies like Zip Co, Afterpay and Sezzle all based in the country. With Afterpay already having crossed the 5 million active shopper mark in the U.S., revealing that more than 1 million new customers started using the platform since March 1, it’s clear that more companies are seeing the U.S. market as a major growth opportunity.

As the COVID-19 pandemic continues to worry consumers as they attempt to make ends meet and reduce their debt, installment payments platforms are designed to alleviate these concerns by enabling shoppers to buy products without having to pay hidden interest fees, unlike a typical credit card.

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“Consumers are increasingly avoiding credit cards and gravitating to flexible buy now, pay later options instead,” said Adam Ezra, QuadPay co-founder and co-CEO. “Installment payment options are transparent, convenient, and give consumers greater control over their finances—they’ll soon become an expected component of the online shopping experience, as common as free shipping. We’re incredibly excited to be riding the wave of change and offering a product that is friendlier to the consumer than high-interest-bearing credit cards and digitized versions of traditional credit. We look forward to continuing the reinvention of payments for consumers and retailers in partnership with Zip.”

Merchants that have partnered with QuadPay thus far have seen positive results—retailers report experiencing a 25 percent increase in conversion rates and average order value boosts between 20 percent and 60 percent.

It appears shoppers are willing to use this technology as they get more familiar with it—40 percent of consumers say they’d be more likely to complete transactions if offered options like but now, pay later at checkout, according to a March survey from and Afterpay.

The installment payments market is growing at 32 percent annually, a March report Worldpay from FIS found. And based on projections, as many as 17 percent of global e-commerce transactions will be made through installment payments.

Under the terms of the latest deal, Zip Co will give 119 million of its shares, or 23.3 percent of the company, to QuadPay. The deal is backed by approximately $130 million in investment capital from Heights Capital Management, an affiliate of the U.S.-based Susquehanna International Group (SIG), which will be used to accelerate both domestic and global expansion. Additionally, QuadPay will use the funding to scale its product and engineering capability to further its lead in product and technology, benefiting merchants and consumers.

The combined company will employ more than 400 people in five locations across the U.S., Australia, the U.K., New Zealand and South Africa. Both Ezra and QuadPay co-founder and joint CEO Brad Lindenberg will remain with the business and are focused on driving growth in North America. Zip Co has agreed to issue additional shares to the co-founders subject to QuadPay reaching certain performance milestones and revenue goals.

In a statement, Zip Co CEO and managing director Larry Diamond highlighted QuadPay as one of the first companies to offer a “virtual card” technology in partnership with payments platform Stripe, noting that it demonstrated “a strong culture of innovation.” The virtual card offers a unique single-use credit card number that allows shoppers to transact on their main credit card account without using—or exposing— their main credit card account number.

QuadPay operates on the same core technology and source code as Zip Co’s U.K. and New Zealand branches, which the company acquired in August 2019 when they operated under the name PartPay. The shared source code enables Zip Co to mitigate the integration costs that can typically result from new technology acquisitions, and more easily introduce new product features across the different markets.

“As a strategic investor in the business, we have spent considerable time with the founders, Adam and Brad, and share a united vision of disrupting the outdated credit card with a digital, and fairer alternative,” Diamond said. “The U.S. is a critical part of our global strategy and vital as merchants increasingly look for a global payments solution.”

Merchants that already accept Visa can offer QuadPay at the physical point-of-sale instantly and at scale, without needing to write a single line of code or modify their POS systems. Its online virtual checkout technology enables e-commerce websites to add QuadPay in a few lines of front-end code without requiring any API integrations or modifications to financial settlement or refunds processes.