BNPL ASX share prices tumble as PayPal declares no BNPL late fees

PayPal’s BNPL product might have an edge against ASX BNPL players. Here’s the rundown.

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It’s a sea of red for buy now, pay later (BNPL) ASX share prices on Wednesday.

The largest BNPL ASX companies including Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P) and Sezzle Inc (ASX SZL) have seen their share prices tumble 9.59%, 10.77% and 10.03% respectively.

Smaller players such as Openpay Group Ltd (ASX: OPY), Laybuy Holdings Ltd (ASX: LBY) and Splitit Payments Ltd (ASX: SPT) are also struggling, sliding 4.95%, 4.76% and 4.05% respectively.

Headlining the slump in BNPL ASX share prices is news that Apple Inc (NASDAQ: APPL) might be launching a new BNPL service to the market.

However, to add further insult to injury, PayPal Holdings Inc (NASDAQ: PYPL) has revealed that it will not charge late payment fees for its BNPL services.

Another stab at BNPL ASX share prices

PayPal successfully launched its BNPL feature in the United States late last year. It would then reveal plans to roll out in Australia by early June 2021.

The announcement first came about on 9 March when BNPL ASX share prices such as Afterpay’s tumbled 5.29% on the day.

Fast forward to today, PayPal has upped the ante by saying it will not charge late payment fees.

The Australian Financial Review (AFR) quotes PayPal Australia’s head of payments Andrew Toon:

“PayPal research of its online shoppers showed high awareness of buy now, pay later options, but more than 50 per cent said they had not used them… and many of them were put off by late fees and we are genuinely responding to that”.

By comparison, Afterpay automatically charges an initial $10 late fee and a further $7 if the payment remains unpaid 7 days after the due date.

In FY20, Afterpay generated $68.8 million from late fees, or 13.7% of the company’s total income.

PayPal will also undercut Afterpay’s merchant fees, with the AFR reporting PayPal will levy a fee of 2.6% of the cost of goods plus 30 cents, compared to Afterpay’s 3.9% plus 30 cents.

Foolish takeaway

Mounting competition is nothing new to the BNPL sector.

Back in 2016, MasterCard revealed its own BNPL product, MasterCard Installments, which it spruiked as an “innovative way to pay that offers consumers flexible and convenient access to funds when needed”.

In late 2020, JPMorgan made its entrance into the booming BNPL space, giving its credit card customers an option to pay through instalments with no interest.

However, today’s news sees a US$2.4 trillion giant, that is Apple, potentially enter the space — as well as payments behemoth PayPal revealing an edge against ASX BNPL players.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Apple, PayPal Holdings, and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2022 $75 calls on PayPal Holdings, long March 2023 $120 calls on Apple, and short March 2023 $130 calls on Apple. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia has recommended Apple and PayPal Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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