- Shares in ASX-listed fintech stocks have fallen on news of a brand-new buy now, pay later (BNPL) platform from online payment giant PayPal
- The new BNPL player, known as Pay in 4, allows consumers in the U.S. to pay off transactions in four interest-free instalments
- Significantly, there’s no fee for merchants who adopt the platform — something major rivals like Afterpay and Zip Co already charge
- The news sent shares in many of the major and mid-tier BNPL listers into the red over Tuesday and Wednesday
- PayPal is just one of many companies to jump into the eCommerce space in recent years — Payment platform Zebit is looking to float on the ASX as a BNPL brand
- Meanwhile, fintech FlexiGroup is looking to prioritise its Humm payment platform as it heads into the new financial year
- The surge the number of emerging BNPL players comes amid estimates the space is set to double in value by 2023
Shares in ASX-listed fintech stocks have fallen on news of a brand-new buy now, pay later (BNPL) platform from online payment giant PayPal.
The new BNPL player, known as Pay in 4, allows consumers in the U.S. to pay off transactions in four interest-free instalments.
What really makes the PayPal platform stand out, however, is that merchants won’t have to pay when consumers use Pay in 4 to complete their purchase.
Piece of the pie
Currently, retailers who use Afterpay (APT) are billed 30 cents, along with a weighted commission, for every transaction made using the BNPL platform. While competitor Zip Co (Z1P) is cheaper, merchants still have to fork out 15 cents and a commission for every customer who wants to pay in instalments.
However, PayPal won’t charge merchants who adopt the platform, and only charges users a late fee if they fail to make their repayment on time.
The debut of Pay in 4 is emphasised by PayPal’s eCommerce presence in the U.S. market. According to Forbes, you can shop with PayPal online with 80 per cent of the top 100 U.S. retailers, while nearly 70 per cent of online shoppers in the country already have a PayPal account.
Based on those metrics and the booming eCommerce space, Lisa Ellis, an analyst at MoffettNathanson said it best: “PayPal can grow 18 to 19 per cent before it gets out of bed in the morning.”
Market spooked
It seems news of a new shark in the water has spooked BNPL investors. Since Pay in 4 was announced yesterday, Afterpay shares have dropped from $91.44 per share to $83.30 in Wednesday’s intraday trade. Zip Co shares have also tumbled, falling from $9.16 a pop to $7.28 per share.
Emerging payment platforms haven’t been able to escape the red either. Openpay (OPY) dropped from $4.32 to $3.72, Splitit (SPT) shares fell from $1.86 to $1.62 and Sezzle (SZL) has shed almost $2 to trade for $8.38 a pop.
Amid the red run, there’s still other companies looking to jump into the eCommerce space. Payment platform Zebit is looking to float on the ASX as a BNPL brand in a $200 million initial public offering (IPO).
Meanwhile, FlexiGroup (FXL) is moving to prioritise its interest-free payment platform Humm to capitalise on the growing BNPL market.
Speaking to the impact of the PayPal platform today, FlexiGroup Chief Rebecca James said the BNPL category was a very competitive, fast-growing market, but one where FXL has a competitive edge.
“It places us in an incredibly strong position. The average transaction value is around $200, and PayPal’s [new platform] is for transactions up to $600 … The majority of our transaction value comes from transactions greater than $1000,” Rebecca said.
“We have a really nice balance in our portfolio of servicing online transactions as well as transactions in-store — our competitors are not well placed within that particular environment. I think it just shows the strength of the differentiated offering we have in the market,” she concluded.
What’s to come?
The BNPL industry is rapidly becoming one of the most lucrative spaces in the eCommerce industry. According to a report released by Worldpay, the value of the space is set to double in value by 2023.
Back in 2018, almost three per cent of all eCommerce payments involved some form of BNPL instalment. But last year, that percentage spiked to eight per cent as major financial stocks like Commonwealth Bank debuted their own BNPL offerings.
In addition, almost two million Australians used a buy now, pay later service in 2019.
This year, as COVID-19 kept shoppers and home and online, digital transactions boomed. Australians spent over $1 billion online over the month of March alone, with over 36 million digital transactions reported.
“The growth in the number of contactless purchases has been increasing since the introduction of Apple Pay last year, however, it’s now evident that even more people regard it as a safe and secure way to pay in this environment,” said CBA’s executive general manager of Everyday Banking, Kate Crous.
As users become increasingly comfortable with online payment platforms, it could pave the way for further growth in the BNPL space.