The share prices of Afterpay Touch Group Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) have gone crazy this year, Afterpay shares have more than doubled and Zip Co shares have more than tripled.
But this hasn't gone unnoticed by some of the world's biggest payment businesses.
Visa and MasterCard have built enviable positions with global networks, high profit margins and seemingly endless growth possibilities from the growth of bank card use in 'emerging' countries and e-commerce in the western world.
But Afterpay and others present a threat to the US payment giants with the payments going through the Afterpay system, although most people still utilise a Visa or MasterCard card for Afterpay at this stage. You can imagine that Afterpay would like to cut Visa and MasterCard out of the loop.
MasterCard isn't waiting to see what Afterpay plans to do. A couple of weeks ago MasterCard announced it had acquired Vyze.
Vyze connects merchants with multiple lenders, giving the merchant the chance to offer a range of credit options online and in-store for the shopping with payment flexibility at the point of purchase. Sounds somewhat familiar, right?
Afterpay can still point to the fact that its service is free for customers if they pay on time, whereas this is still offering credit. But, 'offered by MasterCard' marketing may attract consumers and retailers alike, particularly as Vyze claims to add 40% to 95% of incremental sales and a 60% higher order value for the retailer.
A business that has a durable economic moat is important for the long-term growth performance of the company. Time will tell how well Afterpay does with all of the added competition.