How ASX shares like Afterpay (ASX:APT) push for explosive growth

Most fintech ASX shares operate in contested markets of high volume transactions with low margins. Nonetheless, many of them have been able to rapidly increase their level of transactions via careful strategic partnerships.

For instance, Tyro Payments Ltd (ASX: TYR) recently announced a partnership with Bendigo and Adelaide Bank Ltd (ASX: BEN). ASX share Tyro is currently Australia’s 5th largest merchant acquiring bank, falling just after the big four banks. Meanwhile, Bendigo is Australia’s 5th largest retail bank.

In this deal, Tyro will provide its payments processing services to all of Bendigo’s business customers. This includes both the card-present and card-not-present solutions. Accordingly, Tyro believes it has captured approximately $19 million in gross profit for FY22 via this agreement. Moreover, shortly afterwards, and in an apparent vote of confidence, Morgan Stanley secured $142 million in Tyro shares.

Financial ASX shares in strategic deals

Buy now, pay later (BNPL) giant, Afterpay Ltd (ASX: APT) recently announced a tie up with Westpac Banking Corp (ASX: WBC). Westpac’s digital banking-as-a-service platform will enable Afterpay to introduce savings accounts and cash flow tools to its 3.3 million customers without the need for a banking license. 

Although not an exclusive arrangement, Afterpay believes it will be the default BNPL mechanism on the platform. Moreover, it can scale using the bank infrastructure while retaining the customer relationship. In addition, earlier in the year, Afterpay announced a deal with eBay Inc (NASDAQ: EBAY) in Australia to provide consumers the ability to pay across four payment instalments. 

Rival ASX share, Zip Co Ltd (ASX: Z1P) also has a strategic partnership with eBay. Since August, it offers 40,000 Australian small and medium-sized businesses access to working capital. In addition, it announced a recent deal with Visa Inc (NYSE: V) for its new Zip and Go service. At the same time, the company announced partnerships with Apple Inc.‘s (NASDAQ: AAPL) Apple Pay and Alphabet Inc‘s (NASDAQ: GOOGL) (NASDAQ: GOOG) Google Pay, thus linking its BNPL services to both physical and digital payment methods. Company CEO Larry Diamond, said:

We continuously hear from Zip customers that they want to use their digital wallet to pay for everyday purchases like groceries and petrol or to buy products and services from merchants that don’t accept BNPL.

The company believes this will not only improve customer experience, but also provide additional revenue opportunities for merchants using its service. 

Foolish takeaway

Successful ASX shares in the fintech sector have recently inked several strategic partnerships in an attempted shortcut to faster growth. Of all of the companies discussed above, only the Tyro deal provides for a guaranteed increase in customers. Nevertheless, both Afterpay and Zip are using partnerships to potentially access broader client bases. 

More reading

• Afterpay (ASX:APT) share price on watch after stellar Q1 growth
• Tyro Payments (ASX:TYR) share price tumbles lower following AGM update
• The ASX 200 sank almost 2% today
• Do you have to pay tax on your ASX shares? – A common question answered
• Douugh and Ioupay were among the most traded shares on the ASX last week

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends eBay and recommends the following options: long January 2021 $18 calls on eBay and short January 2021 $37 calls on eBay. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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