PayPal and Visa extend global partnership; a threat to erstwhile BNPL darlings APT and Z1P?

Summary

  • With a paradigm shift in the shopping as well as payment preferences, the attractiveness of BNPL firms has soared primarily due to swelled online purchases and consumers beholding more ways to save their money amid scarce liquidity induced by COVID-19 pandemic.
  • Lately, the advent of PayPal in the BNPL space created a ripple with a plummet in the share price of ASX listed BNPL Companies.
  • Subsequent to the announcement of the extension of real-time payments partnership between Visa and PayPal, share price of many pure play BNPL players again felt the heat, and witnessed a plunge in share price as market participants have been sceptical of BNPL players future performance.
  • Under the extended global partnership of Visa and PayPal, expansion of real-time access to funds would be noted for the consumers, as well as small businesses that are sending or receiving money through PayPal, Xoom or Venmo.
  • Furthermore, through this collaboration, cash flow would be enhanced for small and micro businesses via eradication of the requirement for paper-based processes that could possibly postpone quick access to funds.

Amid COVID-19 pandemic, payment preferences, as well as mode of interaction, have noted a pivotal shift with shopping method moving from physical stores to online marketplaces and cash payments to cashless transactions.

As buy now pay later (BNPL) space is blooming, and numerous FinTech and BNPL players are witnessing enlarged customer base and soared earnings multiples, the market is bound to face competition threats.

Do Watch; Kunal Sawhney on “Buy Now, Pay Later” (BNPL) stocks

Lately (on 31 March 2020), with the advent of PayPal Holdings, Inc. (NASDAQ: PYPL) in the Buy Now, Pay Later market with the launch of an interest-free BNPL instalment solution, Pay in 4, on 31 August created a ripple with plunged share prices of ASX listed BNPL players such as Afterpay, Sezzle and Z1P on 1 September, primarily due to the reaction of the market participants to a new offering by PayPal.

Did you miss watching; PayPal Introduces BNPL Product: What Does it Mean for the Existing BNPL Players?

The ASX listed BNPL players again felt the heat on their share prices and noted a decline buoyed by the announcement of extension of real-time payments partnership between Visa Inc. (NYSE:V) and PayPal notified on 9 September.

On 11 September 2020, the share price of the ASX 200 Company Afterpay Limited (ASX: APT) was down by 2.327% to AU$73.870; Zip Co Ltd (ASX:Z1P) witnessed a decline of 6.698% to AU$5.990, Sezzle Inc. (ASX:SZL) and Openpay Group Limited (ASX: OPY) experienced fall of 9.035% and 6.369%, respectively.

Furthermore, with this extended partnership between Visa and PayPal, market participants are sceptical of the pure-play BNPL players future performance.

 

Additionally, there have been rising concerns that this extended partnership and PayPal’s advent in the BNPL market could disparage the plans of BNPL players like Afterpay and Z1P who wants to diversify and bolster its position in the US market with the acquisition of the US BNPL, QuadPay.

What’s the partnership amid Visa and PayPal all about?

Under the extended global partnership of Visa and PayPal, expansion of real-time access to funds would be noted for the consumers, as well as small businesses that are sending or receiving money through PayPal, Xoom or Venmo.

Notably, this partnership enlarges instant transfer service of PayPal, which leverages Visa Direct for real-time payment abilities, to global markets and empowers fast digital payments both domestically and across borders.

Did you read; PayPal Sign-Ups Trippled in Australia | ASX Market Updates

Also, the partnership would authorise PayPal to broaden global white label Visa Direct payout services via PayPal and its product solutions, namely Hyperwallet, Braintree and iZettle.

Following this expansion, the Instant Transfer service was successfully launched across North America, as well as other markets in Europe and Asia Pacific.

Additionally, eligible PayPal customers could pay as well as get paid by family, friends and companies, and transfer money swiftly from their PayPal, Venmo and Xoom accounts through Visa Direct to their entitled Visa cards.

Furthermore, through Visa’s alliance with PayPal, eligible PayPal, Hyperwallet, iZettle and Braintree, merchants would have quick and an effective access to their money, enhancing cash flow for small and micro businesses via eradication of the requirement for paper-based processes that could possibly postpone swift access to funds.

Noteworthy, the partnership programs would be rolled out across the world over the next couple of months with a focus particularly on branching out the reseller abilities, new use cases and facilitate new markets, globally.

Interesting read; Is the current BNPL crisis boon for Goliath Afterpay as David suffers?

Let us quickly skim through two major ASX-listed BNPL players – APT and Z1P.

Afterpay Limited (ASX:APT)

Fintech’s darling, Afterpay has been expanding and bolstering its position in the US market by bestowing significant value to the US retailers primarily due to enlarged customer retention.

It is worth noting that APT has commenced FY21 with continued positive momentum of strong performance since the June quarter of FY20 across all its regions.

In July and August 2020, Afterpay witnessed augmented online sales in Australian and New Zealand market. Furthermore, in the US, Afterpay’s July underlying sales continued at record levels as witnessed in June 2020 quarter.

Afterpay registered robust performance during FY20, ended 30 June 2020, recording boosted underlying sales and soared revenue growth.

Source: Company’s Presentation, dated 27 August 2020

Going forth, Afterpay intends to make an investment in improving the platform and continued growth in the people resources, undertake co-marketing opportunities, and unify leading market position in its existing markets.

Zip Co Limited (ASX:Z1P)

A BNPL space player, Zip Co concluded the acquisition of QuadPay, Inc. on 31 August 2020 to boost its position in the US market. The Company also experienced bolstered business performance in FY20 with considerable growth in customers and partners, reaching 2.1 million and 24,500, respectively during FY20.

Source: Company’s Presentation, dated 27 August 2020

Zip has plans to launch in the UK market during the first half of FY21.

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