BNPL Player, Afterpay under investors’ scanner

  • Jan 29, 2020 AEDT
  • Team Kalkine
BNPL Player, Afterpay under investors’ scanner

Fintech player Afterpay Limited (ASX:APT) has been rallying this year delivering 19.82% return. The stock settled at a price of $37.99 on 29 January 2020 and has generated a return of 26.71% in the last month.

APT has established its new 52-weeks high price of $38.060.

Good Read: Should You Pay Heed To The ‘Buy Now Pay Later’ Stock, Afterpay Touch?

Being a technology-driven payments company, Afterpay Limited is steering innovation in retail by permitting leading retailers to offer a ‘buy now, receive now, pay later’ service that does not necessitate end-customers to enter into a traditional loan or pay any fees or interest to Afterpay.

According to The Australian Financial Industry Association (AFIA), around 30 percent (5.8 million) of AU adults are currently banking on buy now pay later (BNPL) services for largely making small retail payments.

BNPL Sector Eyeing new Code of Conduct

Australia's BNPL sector has unified to establish the BNPL code of practice to strengthen consumer protections, preserving consumer choice and set better standards for the industry.

The Code’s key parts include obligations for BNPL providers to:

  • assess customers to ensure the product will be suitable to them before providing it, as well as provide additional controls for customers identified as potentially more vulnerable through this assessment process;
  • ensure customers have access to internal complaints handling, so complaints are resolved quickly and fairly, and if they cannot be resolved, can be taken to AFCA;
  • provide hardship assistance to customers that experience financial difficulties;
  • disclose a summary of key product features to improve customers’ understanding of the product and ensure customers are properly informed about the products’ terms and conditions; and
  • ensure vendors and merchants act consistently within BNPL provider guidelines.

Lens through Afterpay’s Achievements

Afterpay has a strong business in New Zealand, and Australia with presence in multiple sectors in Australia, including telecommunications, health and convenience retail sectors. The Company has managed to gain significant number of customers as well as merchants across its business units globally.

Afterpay has achieved a number of milestones over a very less time along with expansion to several countries globally, including:

  • During the month of November 2019, Afterpay achieved $1.0 billion of monthly underlying sales, which is the highest monthly performance since APT’s inception.

The numbers signify a material contribution to the total underlying sales of $3.7 billion achieved in the first 5 months of FY2020.

  • As at the end of November, Afterpay had more than 6.6 million active customers;
  • The US now has a customer base of equivalent size (over 3 million) to Australia and New Zealand after approximately 19 months since launch;
  • In the UK, more than 500,000 active customers have transacted with Afterpay after approximately 7 months since launch;
  • Australia and New Zealand continues to grow strongly in terms of both new and repeat customers.

  • Afterpay’s merchant portfolio and pipeline continues to grow with 42,500 active merchants now offering Afterpay to their customers;

Both underlying sales and new customer growth materially outstripped previous daily records during the Black Friday (on 29 November 2019) and Cyber Monday (on 2 December 2019), and represented record trading days across several key performance indicators:

  • Underlying sales of over $160m (2 days) were up over 160% on the equivalent BFCM days in 2018;
  • New customer growth of over 140,000 (2 days) was up over 160% on the equivalent BFCM days in 2018;

Share Purchase Plan Completion

Recently, APT closed its Share Purchase Plan (SPP) on 17 January 2020, which was first announced on 11 June 2019, under which Afterpay offered up to $15,000 worth of new, fully paid, ordinary shares in Afterpay at issue price of $23, for subscription by the eligible shareholders in Australia and New Zealand (without incurring brokerage or other transaction costs).

According to Company’s reports, around 1.4 million shares shall be issued under the Share Purchase Plan and the Company expects new shares to be issued and allotted to successful applicants on 29 January 2020.

Afterpay’s business Update

Let us take a look at Afterpay’s business in various countries for the month ended 31 October 2019.

  • There were 6.1 million active customers globally representing a 137% increase on pcp;
  • Several major brands were either recently integrated or were in the process of onboarding including eBay (AU), Ulta (US), Finish Line (US), Marks & Spencer (UK), David Jones (in-store AU), and Myer (in-store AU);

ANZ

  • Underlying sales of $1.9 billion in the 4-months to 31 October 2019;
  • Over 3 million active customers and over 33,000 merchants as at 31 October 2019;
  • Dymocks (in-store), TerryWhite Chemmart (in-store), Agoda (online), Swarovski (online), Shein (online), Myer (in-store), Marks & Spencer (online), My Deal (online), David Jones (in-store), and Appliances Online are some of the merchants that had recently gone live or signed with Afterpay;

For more, follow: Buy Now Pay Later Game Getting Stronger in New Zealand- Afterpay Head to Head with Payright

US

  • Underlying merchant sales reached $0.7 billion in the first 4- months to 31 October 2019;
  • 6 million active customers at 31 October 2019, up 51% since 30 June 2019;
  • Ulta, Ruggable, FragranceNet.com, Madewell, Finish Line, Bombas, HAUS LABORATORIES, Outdoor Voices, PacSun, and Shiseido Brands are some of the onboarded brands that constitute over 9,000 active or currently integrating merchants as at 31 October 2019;

UK

  • More than $100 million of underlying sales in the 4-months to 31 October 2019 and current annualised underlying sales was in excess of $0.4 billion based on October;
  • More than 400,000 active customers since launch in May 2019;
  • Around 330 active or currently integrating merchants as at 31 October 2019 including Marks & Spencer, The Hut, Footlocker, Pro Bike Kit, Look Fantastic, MyProtein, Zavvi, and IWOOT;

Outlook

Melbourne headquartered Afterpay Touch Group Limited shall continue investing in innovation in FY2020 principally in the global platform and data capability, which shall enhance value proposition for the merchants and customers.

Being a technology-driven and ASX-listed fintech company, currently APT is engaged in carrying out various innovations in its products and services with some being in the roll-out phase.

In long-term, the trend of growing choice to space out the cost of spending with BNPL options among the global customer preferences is worth noting and can be beneficial for the company’s business.

Read: Is the party over for these Buy Now Pay Later Stocks - Zip Co Limited, Afterpay Touch Group Limited

The Bus Now Pay Later services (BNPL) services are already popular among the customers across the globe, thus, making it a significant prospect for the BNPL service providers like Afterpay.

APT has a network of millions of consumers, including numerous small, medium and large businesses that presents a momentous opportunity for the company to expand its reach in Australia and New Zealand while contributing towards the global stronger margins.

Through its business model comprising of highly customer-centric service based on trust, loyalty and responsible spending habits, APT has managed to secure a high-value and regularly returning customer base, with low outstanding balances and industry-leading loss rates.

However, there is increasing competition among the BNPL players globally with new companies gaining market share rapidly with innovative products and services. Strategic alliances along with unique products and services for the customers’ need can help the Company maintain its mark in the business.


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