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Should Afterpay shareholders be concerned about Shopify’s BNPL launch?

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The Afterpay Ltd (ASX: APT) share price is on course to end the week with a day in the red.

At the time of writing the payments company’s shares are down almost 3% to $70.00.

Why is the Afterpay share price dropping lower?

Investors have been selling Afterpay’s shares on Friday after a disappointing night of trade on Wall Street’s technology-focused Nasdaq index.

US-China tensions and worse than expected jobless claims data hit sentiment and weighed on U.S. tech shares overnight. This led to the famous index dropping 2.3% lower.

It isn’t just Afterpay that is dropping lower today. The likes of Altium Limited (ASX: ALU) and Nearmap Ltd (ASX: NEA) are also in the red. This has dragged the S&P/ASX 200 Information Technology index 1.6% lower.

What else is weighing on Afterpay’s shares?

There is also a spot of industry news that could be weighing on the Afterpay share price today.

Fellow buy now pay later company Affirm, which is run by PayPal co-founder Max Levchin, has just announced a partnership with Canadian e-commerce giant Shopify on a new interest-free, zero-fee payments program for online customers.

According to CNBC, the new “Shop Pay Installments” offering will give approved Shop Pay customers the option to split the total purchase cost into four equal, bi-weekly payments, which will be processed and handled by Affirm. This is identical to the Afterpay model.

While this is certainly going to increase competition in the industry, one broker that isn’t concerned is Goldman Sachs.

What did Goldman say?

Goldman commented: “Clearly alternatives are emerging to APT. SHOP has a merchant and consumer reach which could allow them to acquire a user base more rapidly than most of APT’s other US competitors (especially the likes of Quadpay, Sezzle and Klarna).”

“However, if APT has a large enough consumer base which is transacting frequently (which is what is occurring), merchants may be prepared to adopt both services. In addition, SHOP’s BNPL product will be limited to merchants who use SHOP.”

In light of this, the broker advised that it is leaving its “forecasts unchanged as we believe this announcement is unlikely to impede the company’s achievement of our forecasts.”

I agree with this view and continue to believe Afterpay would be a fantastic long term investment option.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Nearmap Ltd. and Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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