The news out of the US on Tuesday night was pretty much all bad for the domestic and US BNPL space with speculation rife that tech goliath Apple Inc (AAPL US) was developing a “Buy now Pay later” product, the current main US player Affirm (AFRM US) has now fallen over 12% on the news over the last 2-days with a lack of bounce overnight a poor sign for the Australian players this morning. Last August PayPal (PYPL US) announced their intention to enter our BNPL space but after an initial knee jerk lower both heavyweights Afterpay (APT) and Zip Co (Z1P) proceeded to double in price although they are now well below their February highs.
As we touched on in yesterday’s Match out report it appears that Apple are developing a buy in 4 stages product similar to PayPal plus a longer term alternative that will incur interest payments, initially it will be pushed to the ~6.4m Americans that have a current Apple Card account. The brands popularity suggests market penetration will be good wherever it evolves although the Apple card has seen a slow take up, the goliath tech player is probably hoping the BNPL offering will effectively help both gain traction.
PayPal has indeed followed through on their planned foray into Australia with its recently launched BNPL style product appearing to be aimed at Afterpay (APT) with some headline positive benefits: The US payments giant has said there will be no interest, no late payment fees and no sign-up fees if customers use its four instalments option for purchases between $30 and $1,500. This tells me 2 things:
- With these heavyweight US companies eyeing the sector it confirms to us that this will be a legitimate sector for years to come.
- However margins are likely to be significantly squeezed as new players go in search of customers before they focus on retention.
Unfortunately Apple (AAPL US) is a whole new proposition to PayPal (PYPL US) while the combination of the 2 is likely to significantly impact sentiment to the incumbent players both large and small. They could swallow any of our players from petty cash although they have opted to deliver their own platforms / offerings which makes total sense considering their respective backgrounds.
