BNPL - Afterpay falls behind in USA

Spin from Afterpay cannot cover up they are losing share

Buy Now Pay Later (BNPL) has been acclaimed as one the great Australian financial innovations, ‘successful’ due to unfulfilled demand in unsecured consumer credit.

?BNPL companies exploit a legal loop hole in Australia and a passive legal position in New Zealand – yet these products lend consumers money and some consumers will default.

?RBA numbers show BNPL spend has peaked in Australia at 68 basis points market share.

?Australia - October 2021 Official figures ex RBA

Total annual retail consumer payments $1.65 trillion.

Australia 71.1 million cards spending $741 billion

BNPL 5.2 million accounts with $11.4 billion

With Australia market peaking and Europe growth poor the USA market is critical for any future success by Australian BNPL players.

USA MARKET IS CRITICAL

Klarna and PayPal are leading in the USA followed by Affirm, Afterpay is 4th and Zip is a distant 5th fighting FuturePay.

Afterpay had 10.5 million US customers June 30th and Zip 4.4 million well behind Klarna's 20 million -

Afterpay vs PayPal comparing same time volumes - very clear whats happening.

Market overlap is considerable and US research including by Macquarie questions brand loyalty vs shopping around for credit given very high credit losses

USA PYMNTS MAG - 'BNPL Black Friday Totals' – Dec 2nd?2021

Quote - ?

“Surveying over 2,000 shoppers during Black Friday 2021 weekend, PYMNTS found that installments are popular, but still a long way from unseating credit, debit and PayPal.”

Data shows that 5.6% of consumers used BNPL during Black Friday 2021

This research says the US Black Friday market was up by 55% rise over 3.6% in 2020.

Afterpay only did 34% which is 21% down on other competitors.

Important also 2021 figure was much slower than 2020 rise over 2019 - the whole category is slowing.

Buy now-pay later orders rise 34% in holiday season, Afterpay says

Payments Dive By?Tatiana Walk-Morris Dec. 6, 2021

• As buy now-pay later services proved popular over the Black Friday shopping weekend, the Australian BNPL?purveyor Afterpay?reported a 34% increase for in-store and online installment payment orders this holiday season,?the payments company said in a press release?last week.
• Among the top categories with U.S. shoppers this year were fashion, footwear, beauty, homeware and fitness, Afterpay?said. The top-selling items purchased using its installment payments were clogs, weekender bags, trucker hats, pajamas and shoes, according to the release.
• Afterpay?cited 11% more Gen Z shoppers using buy now-pay later options between Black Friday and Cyber Monday compared to last year. Overall, the platform also reported a 30% year-over-year increase in its users' spending online.

Sydney-based Afterpay was?acquired by payment tools company Square?in August for $29 billion, underscoring the rise of the buy now-pay later trend worldwide.

Though this year's holiday shopping season has yielded mixed results so far, consumer demand for buy now-pay later options has clearly risen. Compared to 2019, installment payment spending?more than quadrupled?in November, research from Adobe found.

Afterpay's uptick follows the platform's entry into in-store payments. In October 2020, Afterpay enabled shoppers to?make installment payment purchases?via a contactless, virtual card?in their digital wallet.

"As we celebrate another holiday season in the pandemic, consumers were eager to gain a sense of normalcy and spend on gifts for themselves and loved ones," Zahir Khoja, Afterpay's general manager of North America, said in the statement.

Amid this period of growth, other payments providers and retailers are also looking to offer the service to customers. Retailer Target?introduced services from BNPL players Affirm and Sezzle?in October,?and Mastercard recently announced that it would?launch a buy now-pay later option?sometime next year.?

Yet, some question whether the advantages of installment payments are worth the risk to consumers and providers.

Fitch Ratings?released a report?this year?indicating that consumers attracted to buy now-pay later services may not repay the balance if they face financial hardships. And because BNPL providers don't always report their customers to credit bureaus, they may not accurately assess borrowers' debt levels.

In November, the House Financial Services Committee's Task Force on Financial Technology?held a hearing?during which Marisabel Torres, director of California policy at the Center for Responsible Lending, testified regarding the potential risk of buy now-pay later services damaging young people's credit and overloading them with debt.