Mention the phrase ‘buy now, pay later’ (BNPL) to an ASX investor and which company names pop up? The big players Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P). Then there’s Sezzle Inc (ASX: SZL) and Openpay Group Ltd (ASX OPY).
BNPL has taken the ASX by storm in the past 2 years, with multiple companies such as those listed above recording triple-digit share price gains since 2018.
But Paypal Holdings Inc (NASDAQ: PYPL) is probably not one of them. PayPal is known for its e-commerce prowess. It has become almost as ubiquitous as the card payment giants Visa Inc (NYSE: V) and Mastercard Inc (NYSE: MA) in the global payments scene over the past decade or so.
PayPal and BNPL
According to the Australian Financial Review (AFR), PayPal has benefitted enormously from the changes that the coronavirus pandemic has brought to society. The US payments giant is very close to reporting more than US$1 trillion in annualised transaction value, with BNPL payments making “tremendous” progress, the AFR reported.
PayPal chief executive Daniel Shulman was quoted as saying:
I’m extraordinarily pleased with the success we’re having with buy now, pay later… We rolled this out in France several months before we introduced this into the US and UK, and the up-tick that we’re seeing in the French market is well beyond any of our expectations. We just rolled out in the US and the demand is tremendous.
PayPal offers a BNPL product called “Pay in 4” or “Pay in 3”, which, as the name suggests, allows customers to pay in 3 or 4 interest-free instalments. Unlike the products offered by ASX players like Afterpay and Zip, PayPal’s offering doesn’t charge any merchant fees for the privilege of using the BNPL option beyond its established pricing structure.
PayPal has also been expanding into other ‘unconventional’ payment methods like bitcoin and other cryptocurrencies.
What can ASX investors take from this news?
It will be interesting to see if PayPal’s data shows a shift towards the BNPL payments trend as a whole, or if it shows a shift within BNPL to larger global players like PayPal at the expense of ASX players like Aferpay and Zip. Remember, Zip and Afterpay are also trying to expand into the same markets that PayPal serves, such as the US and the UK.
One thing is for certain though: it looks as though the BNPL concept is very much here to stay.
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Sebastian Bowen owns shares of Mastercard and Visa. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Mastercard, PayPal Holdings, and Visa. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Sezzle Inc and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Mastercard, PayPal Holdings, 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.