The competition in the buy now, pay later (BNPL) field is fierce.
The rising subsector is seen as crucial for the finance industry to winning millennial and generation Z clientele, who are shying away from traditional banking products.
Only 36.9% of people knew about BNPL back in September 2018, according to polling firm Roy Morgan.
But this week 72.4% of Australians were now shown to be aware of buy now, pay later services. Plus 14.7% actually use a BNPL service.
But it seems one particular company has a massive lead over its rivals.
Afterpay's network effect
Afterpay was the "clear market leader" in awareness, according to Roy Morgan, with 70% of Australians now aware of what it does.
That's a huge lead over second place, which was taken by Zip with 48.6% of Australians knowing about its services.
That's more than 40% daylight between first and second.
Awareness of Afterpay has increased 36 percentage points since the last survey in September 2018. Zip is up 30.5 percentage points.
Afterpay's market dominance becoming more entrenched could be seen as the network effect, where a system becomes more attractive the more people participate.
It's the same phenomenon that's seen Facebook Inc (NASDAQ: FB) become so popular. As more people joined the platform, the more valuable it became and more attractive to those who hadn't yet joined.
The 'second tier' BNPL players, as Roy Morgan labels them, had more modest brand awareness. About 20% of Australians were aware of Latitude Pay, and both Humm and OpenPay just topped 11% each.
Roy Morgan chief Michele Levine said there was definitely a generational difference in the use of the different BNPL brands.
"Although people aged 25-34 are the most likely to use market leaders Afterpay and Zip, the second-tier services provided by Humm, Latitude Pay, and Openpay are all more likely to be used by a slightly older demographic."
COVID-19 pandemic boosted BNPL adoption
According to Levine, the coronavirus outbreak last year created a perfect storm for BNPL industry to thrive.
"Unprecedented stimulus payments from the government, including the $100 billion JobKeeper wage subsidy, supported the economy and led to a boom year for many larger retailers."
Levine cited Australian Bureau of Statistics figures that retail sales increased by an average of 8.8% year-on-year for the 9 month period from May 2020.
"The closure of the international border, as well as domestic state borders for much of the year, prevented spending on travel and tourism and led many to spend on 'retail therapy'."
As well as younger Australians, women are taking up BNPL far more enthusiastically than men.
"Women are the key users of buy-now-pay-later services and have adopted the new fintech digital payment services at almost twice the rate of men while nearly a quarter of people aged 25-34 use the new services – a higher rate than any other age group," said Levine.
Most of the ASX-listed BNPL providers saw their shares spike up on Thursday, just before the Easter long weekend.