The Zip Co Ltd (ASX: Z1P) share price is currently higher amid news that the buy now, pay later operator is linking up with a business in the childcare sector.
According to reporting by The Australian, from next month families will have the ability to pay for childcare at more than 10,000 centres in Australia and New Zealand by using buy now, pay later.
Zip is working with Xplor Education which provides administration and parental support to childcare centres. The buy now, pay later option will be added to payment options with centres linked with Xplor Education.
There are two benefits that will supposedly come from a shift to buy now, pay later. The first is that Xplor Education aims to make childcare more affordable and flexible for families. The other area is saving on time because of how often staff are chasing fees and collecting invoices.
The Australian quoted Xplore Education CEO Mark Woodland, who said:
We know there is demand for tailored payment options in the Australian market, and believe this innovative initiative will improve access to childcare for more families. What we've added through the Zip partnership is the ability for parents to spread the cost of childcare, which can be incredibly expensive. Parents usually have to choose between picking up an extra shift and having to choose if their child can go into care or not, and they just don't have the means to fund it.
One of the areas that investors may look at when deciding what to value the share price is its transaction volume, which Zip is probably hoping will rise from this partnership.
How will it work?
The Australian reported that new customers would be subject to credit checks. However, childcare customers wouldn't be paying in four equal instalments. Zip's commercial director, Colin Baines, explained that families can change the monthly repayments to repay multiple invoices.
Mr Baines said:
They're paying it off on a monthly cycle, so it actually helps from a budgetary and management perspective with customers.
Consumers can opt to pay the minimum amount that's required with us, or they can choose to make additional payments. We work with our consumers in relation to the payback and how they are paying those moneys back, and we find that only 1 per cent of all our consumers across the platform fall into a position where they can't make repayments with us.
Zip share price snapshot
The buy now, pay later business is currently up by 1.2% at the time of writing. That compares to the S&P/ASX 200 Index (ASX: XJO) which is up 0.2%.
The broker UBS still rates Zip shares as sell, with a price target of $5.40. One of the things it notes is the recent proposed rules relating to payment surcharges.
