Buy now, pay later player Splitit – Are Market Players Rebooting the Stock Thesis?

Summary

• Increase in demand for contactless payment has supported many players from the BNPL industry in the expansion of their respective business.
• BNPL player Splitit noted a significant growth of 260% in the merchant sales volume during Q2 FY2020 on pcp.
• The Company’s performance has been consistent and robust since its listing on the ASX, thus, giving confidence to market players to revisit the stock thesis.
• The recent achievement during the quarter includes the integration with Stripe and Blue Snap.
• SPT also signed a five-year agreement with Mastercard.

Splitit Payment Limited (ASX:SPT) allows e-commerce merchants to offer interest-free monthly instalment payments to their clients at the point of sale. It is the only BNPL plan that enables shoppers to use the present credit card to pay in small, monthly instalments.

Q2 FY2020 Trading Update:

On 8 July 2020, Splitit Payments provided a trading update for Q2 FY2020, ended 30 June 2020. The Company witnessed an impressive growth of 260% to US$65.4 million as compared to the previous corresponding period (pcp). From North America, the merchant sales volume grew 261% while from Europe it was 240%. The gross revenue rose to US$2.4 million, up by a massive 460% on pcp.

The total merchants improved 104% to reach 1,000. The average order value increased by 44% on pcp. There was a rise in the total unique shoppers by 85% to 309,000. Some of the big new merchants include Purple, Daily Sale, Quiet Kat, Dreamcloud, Bedmart, Scorptec, Tatami Fightwear, Sofa Club, Alpina Watches.

The Company also signed a new partnership with Mastercard and had also integrated with Finance for Group and Blue Snap.

Today’s ASX announcement had a positive impact on Splitit’s share price. The stock, at the end of the day’s trade, stood at A$1.480, up 8.425% from the previous close.

The Company had made its ASX debut on 29 January 2019, and since then, its stock has generated a gigantic return of 259.21%. The shares have consistently delivered a positive performance with impressive gains of 273.97% and 105.26% in the previous three months and six months, respectively.

Splitit’s consistently good performance, coupled with the growing demand for the contactless payment and the Company’s focus on strategic collaborations, has led some market players to reboot their investment thesis regarding this stock.

In this article, we would look at the recent achievements of the Company in detail and its position amid COVID-19 crisis.

As highlighted above, the Splitit delivered record growth in the second quarter. During the quarter, some achievements of the Company include:

Integration with Stripe Connect:

During the quarter, Splitit completed the integration with Stripe. The beta testing of new, accelerated, merchant onboarding is under progress. As this functionality is implemented more broadly later in the third quarter, the Company expects to see new merchant acceptance accelerate when it moves towards the target of allowing merchants to self-onboard in minutes. This would improve Splitit’s funded model process, possible by automating acceptance and movement of money for all funded transactions. Further, it would also enhance merchant experience, including multi-currency support and improved reporting tools.

Integration with Blue Snap:

Another achievement of the Company during the quarter was its integration with Blue Snap, a payment platform for B2B and B2C businesses. The best part of Blue Snap is that it supports online and mobile sales, marketplaces, subscriptions, and invoice payments. With this integration, Splitit would be able to reach a broad range of fast-rising eCommerce merchants & offer them instalment payments immediately on their platform. The Company also extended its integration with Magento, which was a component of the partnership announced during the first quarter.

Five Year Agreement with Mastercard:

In June 2020, SPT entered an initial five-year deal with Mastercard to speed up the adoption of instalment solutions by using Mastercard’s network of global partners. Initially, the plan is to launch pilots across three markets before rolling out on a global level. In this process, the Company would combine the instalment solutions with Mastercard’s technology suite as a network collaborator to allow merchants to deliver seamless and secure consumer experiences at checkout at the store or during an online transaction. Further, Splitit, along with Mastercard, would together build other instalment and related products. The US-based Company’s Payment Gateway Services plus the Application Programming Interface will allow systemic, scalable approach to provide the Splitit solution. The collaboration would also be looking for enhanced partnerships with Mastercard’s suite.

As per Zahir Khoja, Executive Vice President of Global Merchant Solutions and Partnerships at Mastercard, the partnership with Splitit would help Mastercard to attain higher transaction volume for businesses and provide budgeting solutions. The integration would offer customers and firms with choice, control, and simplicity.

A Word from Brad Paterson, CEO and Managing Director on the Board of Splitit:

As per Brad Paterson, the strategic partnership is an integral part of the Company’s growth strategy. With these partnerships, the Company would have access to various merchants and the payment networks via its globally scalable business model. It would also extend the product offering to allow a better client experience.

In the upcoming period, the Company would focus on improving the experience for merchants and consumers.

Splitit during COVID-19 Crisis:

During the challenging period of COVID-19, Splitit witnessed growth across all leading key performance indicators supported by unique business model advantage and relevance in the marketplace. Being the only instalment payment provider offering merchants with an instalment payment solution without burdening customers with new debt, SPT could place itself well for continuous growth backed by strong brand differentiation, core underlying foundations, a mitigated risk profile and a business model that is capable of accelerating growth across all key operating metrics.

In May 2020, the Company delivered a strong performance with 321% growth in the merchant sales volume.