It looks like the Afterpay Ltd (ASX: APT) share price continues to benefit from its first-mover advantage. This is not the only reason why the Zip Co Ltd (ASX: Z1P) share price is behind.
APT share price
Z1P share price
Macquarie research reveals interesting insights
Macquarie conducted a survey of 1,000 consumers in the United States regarding their views on buy-now-pay-later (BNPL).
Only 1.6% of people surveyed described BNPL as their primary method of paying in-store and 3.1% for online purchases.
As for people who were already using BNPL, only a small percentage view it as their primary paying method, 5% for in-store and 9% for online.
It seems BNPL still has a long way to go before it becomes the main payment method.
Battle of the brands
When US consumers were asked about which one had the best brand perception, Paypal Holdings Inc (NASDAQ: PYPL), Affirm Holdings Inc (NASDAQ: AFRM) and Afterpay came out on top.
The Australian Financial Review also noted PayPal’s lead over Affirm and Afterpay has reduced.
The survey results seem to confirm long-held concerns over the low switching costs for customers when deciding which BNPL player to use.
A vast majority said they would use a different payment method if their preferred payment method was unavailable.
Also, around 70% would change the BNPL player rather than go to a different store that offered their preferred BNPL payment method.
My takeaway
Whilst this survey is a small reflection of the broader economy, it’s something to monitor down the track.
I think optionality will be key to the future growth of both Afterpay and Zip.
It’s evident from the survey results that it’s proving to be quite difficult to build a sustainable competitive advantage.
So, I would monitor the capability of Afterpay and Zip in making their product and service more important for both merchants and customers.
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