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COVID-19 Stats:
As per a report released by the World Health Organization (WHO) on 16 March 2020, there were more than 16,500 confirmed cases of COVID-19, globally, out of which around 14,000 were new cases. The number of casualties due to the virus outbreak has crossed 6,600 (including ~860 new deaths).
In Australia, there were a total of 298 confirmed cases of coronavirus, as on 16 March 2020. Total number of deaths in the country reached 5, due to the local transmission.
The Reserve Bank of Australia (RBA) released a report on 11 March 2020 stating that the COVID-19 outbreak has significantly disrupted the momentum (pickup in global growth before the outbreak), initially in China and then to other countries on a global scale.
For the Australian economy, RBA estimates that the outbreak will have a direct impact on the education and tourism sectors during the first quarter of the calendar year 2020. The inbound airline capacity from China dropped by 90% and the Australian dollar depreciated by 6% since the beginning of the year 2020 to decade lows against the US dollar.
Further, last week, the Reserve Bank of Australia had lowered the cash rate by 25 basis points to 0.5%, targeted towards providing support to the economy by boosting demand and to offset the tightening in financial conditions.
Government Preventive Actions:
In order to prevent the spread of coronavirus, the government has taken steps by restricting travelling to Australia from countries like mainland China, Iran, South Korea and Italy. People are being asked to isolate themselves for 14 days in case of any symptoms of the disease. They have been asked to stay at home and avoid going to work, schools or public areas.
BNPL – A Popular E-Commerce Payment Method
Consequently, this scenario is expected to give a boost to online platforms and services, such as Buy Now Pay Later (BNPL), which is the most popular e-commerce method of making payment in Australia.
As per a report by JP Morgan, BNPL services are used in ~ 52% of total transactions in Australia, with sales surpassing more than $17 billion. The BNPL method is assisted by credit-providing intermediary amid shoppers and e-commerce merchants. Using this method, customers can purchase an item immediately while payment towards that transaction can be made in instalments.
‘Buy Now, Pay Later’ services to do online shopping are gaining huge traction primarily amongst young population in Australia.
In this article, we would be discussing two BNPL companies listed on ASX. Let us gauge how these companies are performing amid the coronavirus outbreak.
Zip Co Limited
Point-of-sale credit and digital payment services provider, Zip Co Limited (ASX: Z1P), on 13 March 2020, provided a market update concerning the impact of recent volatile market conditions due to the coronavirus outbreak on its business.
According to the Company, as on the date of the update, its business has not experienced any material impact from the outbreak and is continuing to perform robustly. The business is reporting growth in terms of customers and transaction volume. Moreover, it has a strong pipeline of enterprise partners in integration or is in talks that are an advanced stage.
During the period from January 2020 to February 2020, the Company’s revenue stood at $30 million, up 98% as compared to the previous corresponding period. The core transaction volume quarter-to date was noted at $403 million, representing an increase of 85% year-on-year.
The Company feels that there would be a softening in demand in segments such as discretionary spend categories, bricks and mortar retail, travel and tourism. As a result, there would be strong demand for online purchases, bill payments, everyday expenses & health, areas where Z1P is trying to increase its penetration.
The Company, which has a strong position owing to its recent equity placement of $62 million in December 2019, is positioned well to respond as well as adapt any potential credit impact from coronavirus due to its significant investment in its market leading proprietary credit & decisioning systems.
The credit and ID checks have been conducted on each client since the beginning. Also, Z1P is capable of adjusting its credit scorecard immediately for handling any possible increased risk.
Stock Information:
The stock of Z1P was trading upward by 4.461% to $1.405 on 17 March 2020 (AEDT 01:44 PM). The Company has a market cap of $525.07 million and delivered a negative return of 61.57% in the last six months.
Splitit Payments Ltd
Credit card-based instalment solutions provider, Splitit Payments Ltd (ASX: SPT), on 16 March 2020, released an announcement, highlighting that there is no material impact from the coronavirus outbreak on its merchant sales volume or revenue. Even though there would be softer consumer spending across the globe, the Company is experiencing robust growth when it comes to new merchants and partnerships.
SPT had a cash position of $16.3 million as at 31 December 2019 and an external factoring facility in place. Further, the unique business model of the Company means its exposure to credit losses is negligible.
Splitit Payments, which is a global organisation with its operations in countries like the US, Canada, UK, Australia and Israel, is capable of handling changes in working requirements in response to coronavirus to limit any disruption to its operations.
SPT’s CEO and Managing Director, Brad Paterson stated that the health of the Company’s employees and their families is their top priorities and on this front, the Company has implemented several actions like recommended work from home, suspension of business travels & business continuity plans to ensure that the product development along with the customer support does not get affected.
He added that since the business is focused on eCommerce, it is well positioned to assist the present as well as prospective customers in these uncertain times. In the current scenario, the responsible usage of credit for shoppers on their terms is more important than ever before. On this note, the Company is working closely with its merchants as well as partners to assist them in enhancing the conversion and experience for their clients.
Stock Information:
The stock of SPT was advancing upward by 1.562% to $0.325 on 17 March 2020 (AEDT 01:45 PM). The Company has a market cap of $99.69 million and delivered a negative return of 35.35% in the last six months.
Due to the preventive measures taken by the government to fight the deadly coronavirus, people seem to buy products via the online forum, as a result of which, there is a possible less material impact on the Buy Now Pay Later segment.
