The Zip Co Ltd (ASX: Z1P) share price was the worst performer on the S&P/ASX 200 Index (ASX: XJO) in September.
Over the 30 days, the buy now pay later provider's shares lost a disappointing 33% of their value.
Why did the Zip share price crash 33% lower in September?
As well as getting dragged lower in a tech selloff that led to the S&P/ASX All Technology Index (ASX: XTX) falling 4.9% last month, investors were selling Zip and other buy now pay later providers due to increasing competition in the United States.
For example, the Afterpay Ltd (ASX: APT) share price fell 12.5% in September and the Sezzle Inc (ASX: SZL) share price lost almost 33% of its value.
What is happening in the US market?
At the start of September payments giant Paypal announced its intention to enter the buy now pay later market with its Pay in 4 product.
Pay in 4 is a short-term payment solution that will allow consumers to make a purchase and pay over four interest-free instalments. This is just like Afterpay Ltd (ASX: APT), Sezzle, and Zip's US-based QuadPay business.
PayPal is due to launch Pay in 4 in the United States in the final quarter of 2020.
Investors appear concerned that its entry in the market will increase competition greatly and squeeze out some of the smaller players.
And although Zip's QuadPay business has a large and growing customer base in the country, it has nowhere near the same level of traction as market leaders Afterpay and Klarna. This could mean that PayPal's entry stifles QuadPay's growth and leads to Zip falling short of the market's lofty expectations.
Is this a buying opportunity?
While there is a lot of uncertainty given PayPal's entry, I still believe Zip would be worth considering as a long term option.
Especially considering the size of the US market. Management has previously noted that it is worth an estimated $5 trillion a year. This means there's plenty of room for multiple players to operate successfully in this market.
Though, I can't help but feel that it might be worth the company adjusting its US business model to be more in line with its Australian business to help it stand out in the crowded market.