November 2019

Posted by Anton Murray Consulting on . Posted in 2019

Afterpay has enjoyed a stellar ride this year both in terms of share price and customer acquisition. However, a recent slump in performance, increased competition, and scrutiny from regulators like AUSTRAC, are changing the outlook for Afterpay.

Beyond these market and business factors, a growing move towards the ‘buy now, pay later’ model has also played its part. Whilst it is true that ‘layby’ and other such concepts have operated for some time, Afterpay has been at the forefront of formalising the idea into a saleable and scaleable business.

Part of the negativity towards ‘buy now, pay later’ (BNPL) services is that they encourage spending behaviour beyond the means of the individual. Australians hold large amounts of personal credit card debt, but at least there’s a fairly robust process that goes into applying for, and receiving, a credit card. Services like Afterpay allow users to pay in instalments over time with a certain limit set on specific purchases. Canstar has warned that even if consumers purchase within their limit, the repayments can be similar to large credit card debt or a personal loan for an item like a car. This doesn’t take into account the extra costs associated with missing payments, which can certainly increase the pain for GenY consumers for whom the service is seemingly targeted.

Afterpay has had to field the most scrutiny as the first mover within the BNPL model, and they now also face increased pressure from new entrants such as HummSezzlezipPay and FlexiPay. We’ve also recently seen big players such as Visa and MasterCard starting to join in. This could prove important to Afterpay who began their US expansion this year. America is where the consumers are and of there’s a big pay day for the business that navigates that terrain the best. Added to this is the power the big players have in the market already with brand recognition and incentivised credit card schemes that might dissuade consumers to switch to a new platform.

There is certainly more to play out in the BNPL space, particularly in the US. Afterpay have truly disrupted the solid credit card market in Australia. It will be interesting to watch how regulators continue to monitor this area, and just how big ‘paying later’ will become.

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