Search ASX code:
Generic filters

Search ASX code:
Generic filters

Search ASX code:
Generic filters

Search ASX code:
Generic filters

Big US BNPL player coming, will Zip (ASX:Z1P) shares suffer?

A big US-based buy now, pay later player called Affirm is reportedly coming to Australia. Will Zip Co Ltd (ASX: Z1P) shares suffer?

What’s going on?

The Australian Financial Review’s Street Talk is reporting that one of the biggest buy now, pay later (BNPL) players called Affirm is thinking about coming to Australia.

Affirm has reportedly been thinking about coming to Australia for a while. The AFR wasn’t sure how advanced the plans to enter Australia are, but it is getting one of its products ready for the market.

At the moment the BNPL business only has operations in the US and Canada. Australia will be its first foray outside of North America.

According to Citi, whilst it may have less customers than Afterpay and Klarna, it actually has more monthly users.

A key difference between Affirm and other players like Afterpay is that repayment schedules are stretched over six, 12 or 18 months.

What will this mean for Zip and Afterpay?

Well obviously it’s too early to tell at this stage. At the moment Affirm isn’t even operating in the country.

Zip and Afterpay may be too entrenched for Affirm to make much of a difference in the market. However, if it offers the longer payment periods in Australia as well then some customers may be attracted to that.

For me, it’s not the growth of customer numbers that’s the issue. I am concerned that more competition in the buy now, pay later market will mean that profit margins will be reduced at some point.

If the options are interest-free, then it may not matter to customers which provider they go with. But merchants are the ones largely paying for the system. A new competitor like Affirm could offer lower merchant fees to attract retailers to the system.

When you look at the net transaction margin, Zip and Afterpay have pretty narrow margins. A one percentage point decrease of the merchant fee would make a massive difference to the potential future profit of the local BNPL companies.

There’s still a lot more growth of users, merchants and underlying sales for Afterpay and Zip, which may keep driving the share prices higher. But the profit growth isn’t as certain.

I would much rather invest in payment businesses like Pushpay Holdings Ltd (ASX: PPH) or perhaps EML Payments Ltd (ASX: EML) which are much more likely to generate good profit growth (at a reasonable price) in the coming years.

Are you stuck wondering where to invest right now? Have you got cash 'sitting on the sidelines'? Are you looking for dividend income AND growth but don't know where to start? Rask's expert ASX analyst team has just released a full report, detailing where we'd invest $10,000 right now.

Not only are we offering these 11 investment ideas completely FREE, we've also released an in-depth podcast to go with the report!

So, whether you have $2,000 or $50,000, our brand new analyst report could help transform your watchlist. Right now, you can get the full analyst report emailed to you for FREE by CLICKING HERE NOW or simply entering your email below.

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Are you stuck wondering where to invest right now? Have you got cash 'sitting on the sidelines'? Are you looking for dividend income AND growth but don't know where to start? Rask's expert ASX analyst team has just released a full report, detailing where we'd invest $10,000 right now.

Not only are we offering these 11 investment ideas completely FREE, we've also released an in-depth podcast to go with the report!

So, whether you have $2,000 or $50,000, our brand new analyst report could help transform your watchlist. Right now, you can get the full analyst report emailed to you for FREE by CLICKING HERE NOW.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

LIVE ASX Chat - Join in!

Play Video

Keep reading:

Rask Analyst’s $10,000 Hypothetical Portfolio 

Rask Australia’s expert analysts have just released 11 stock & ETF positions they’d buy right now as part of a $10,000 hypothetical portfolio. 

Completely free, this report comes with the exact ticker codes, how much the analysts would invest and a detailed over the company and why we like it. Plus a 60-min podcast! 

Simply enter your email address and we’ll send you the report.

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.