Buy now, pay later is an arrangement wherein the consumers can buy goods and services immediately (in-store or online), and pay for these spontaneous purchases in instalments over a span of time. This system has gained immense prominence in Australia with the users of Buy now Pay later (BNPL) rising by 500% to 2 million in the last two financial years, according to the Australian Securities & Investment Commission (ASIC) report.
The underlying mechanism for BNPL involves the consumer paying a fraction of the full price of their product or service online or at the store and receive the product at the point-of-sale (PoS) like in case of a regular purchase. Meanwhile, the retailer is also paid the full amount, minus a transaction cost (usually 5%), at PoS by the BNPL service provider, which acts as a third party to an otherwise ordinary transaction which then collects the remaining balance from the consumer and assumes the credit/default risk of the payment collection.
Some of the most active and flourishing players in the Australian market include the following.
Afterpay Touch Group Limited
Afterpay Touch Group Limited (ASX: APT) is a technology-driven payments company which provides ‘Afterpay’ and ‘Touch’ products in Australia, New Zealand and the United States. Afterpay is a retail innovation platform offering BNPL service that does not require any traditional loan or payment of an upfront fee or interest from the customers’ end. As per the revenue model, the company’s core source of income is the transaction fees paid by the retail merchant clients (Merchant fee) during the underlying Afterpay sales. Merchant fee, which represented for 75% of the product’s revenue in FY2018, is the total of a percentage of the customer order value plus a fixed per-transaction fee. APT has a market cap of AUD 4.75 billion. At the end the trading on March 5th, the APT stock closed at AUD 19.900, down 0.45%, indicating an intra-day loss of AUD 0.090. However, the stock has offered a decent YTD return of 66.58% as on 4 March 2019.
Splitit Payments Ltd
Splitit (ASX: SPT), headquartered in New York, is a payment method solution enabling customers to pay for purchases with a current debit or credit card by splitting cost into interest and fee-free monthly payments without the need for registrations or applications. Their primary income is also derived from the merchant fees which is in turn earned from two varying business models, which differ in the timing for fee collection- the Funded model and the Basic model. For the financial ended December 31st, 2018, the reported revenue grew by a staggering 203% to $ 789.9k, reflecting the company’s growth across all key metrics. Splitit has a market cap of AUD 302.01 million and the SPT stock’s last trading price on March 5th, 2019, stood at AUD 1.035, plummeting by 7.589%, indicating an intra-day fall of AUD 0.085. However, the stock has soared by 64.71% over last one month, as on 4 March 2019.
ZIP Co Limited
Zip Co Limited (ASX: Z1P) is another industry player offering innovative payment solutions in the digital retail finance sector. It provides point-of-sale credit and digital payment services to the retail, education, health and travel industries through the Zip Pay, Zip Money and Pocketbook brands as the society shifts toward Alternate Payment methods (APMs). Its Pay later business model is based on ID and credit checks, investments in AI, affordability through interest-free terms, flexible payments schedules and transparent fee. They have continued collaborations with around 6000 large and small retail partners as posted for FY2018. Z1P has a market cap of AUD 557.61 million with ~ 315.04 million outstanding shares. With the close of the trading session on March 5th, the Z1P stock closed at AUD 1.720, down 2.825% indicating an intra-day loss of AUD 0.050. However, the stock has generated impressive YTD return of 60.91% as on 4 March 2019.
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