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This year. We're going Beyond.

BNPL ASX shares vs PayPal (NASDAQ:PYPL)

According to the Australian Financial Review’s coverage of the BigCommerce report on the online shopping sector, Paypal Holdings Inc (NASDAQ: PYPL) and credit cards are preferred over BNPL companies for Aussie consumers.

What does this mean for buy now, pay later companies like Afterpay Ltd (ASX: APT), Z1P Co Ltd (ASX: Z1P), Sezzle Inc (ASX: SZL), and Splitit Ltd (ASX: SPT)?

Paypal still on top for online shopping

According to the BigCommerce report, PayPal was used in 41% of total online transactions in 2021, a jump of 1% relative to last year. Credit card usage also experienced the same increase, representing 28% of total online transactions in 2021 while debit card usage remained the same at 19%.

BNPL companies accounted for 13% of online expenditure in 2021, down from 14% last year.

The survey was completed in January by Power Retail on behalf of BigCommerce.

Demographic stats indicate a slowdown in BNPL interest

As expected, younger consumers between 25 and 34 used BNPL more than older consumers. In this younger age bracket, BNPL represented 17% of online spending, while PayPal was the most popular at 35%.

For shoppers under 25, debit card payment was by far the most popular method of payment, taking out 41% of online purchases. This was similar for those on the other spectrum as 55% of online transactions for shoppers over 65 used PayPal.

The report noted an interesting sentiment amongst higher-income households, who apparently were twice as likely to use credit cards and half as likely to use BNPL.

Furthermore, the report advised a higher proportion of shoppers (28%) planned to decrease their usage of BNPL, and only 12% planned on reducing their usage of PayPal.

My thoughts

Readers should be mindful that such survey results are usually based on a sample size, so it’s not an accurate reflection of the broader economy.

Nonetheless, these results can provide some insight into consumer sentiment. As my colleague, Patrick Melville explains in his analysis of Afterpay, many have indicated BNPL companies may lack a sustainable competitive advantage.

Given most BNPL players provide a similar service, consumers will likely feel indifferent about which BNPL to choose.

BNPL does provide the consumer with added flexibility but PayPal is planning on launching its “pay in four” instalment option in June.

Based on the demographic stats, the BNPL sector will rely on the 25 to 34 consumer bracket for future growth. However, the statistics also indicate a growing shift away from BNPL and credit cards.

I think the BNPL companies will face challenging headwinds over the future as PayPayl rolls out its instalment service and the growing shift or return to traditional payment methods.

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

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