How has the Afterpay (ASX:APT) share price responded to competition in the past?

As competition intensifies in the BNPL sector, we look at how did the Afterpay share price respond in the past.

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The Afterpay Ltd (ASX: APT) share price endured a rude awakening on Wednesday, tumbling 9.59% to $104.71.

Afterpay shares were quick to sell off after news emerged that Apple was looking to develop its own buy now, pay later (BNPL) product.

On the same day, PayPal announced that it will not charge late payment fees for its BNPL services.

From mounting competition and increasing product differentiation, how did the Afterpay share price respond to such concerns in the past?

ASX-listed newcomers

Afterpay and Zip Co Ltd (ASX: Z1P) were the first movers when it comes to going public, listing in May 2016 and September 2015 respectively.

Fast forward to 2019, there seemed to be no shortage of new players seeking to raise capital to try and grab a piece of the BNPL market.

In January 2019, Splitit Ltd (ASX: SPT) made its ASX debut at a listing price of 20 cents.

The now third-largest ASX-listed BNPL player, Sezzle Inc (ASX: SZL) would list on July 2019 at an offer price of $1.22.

Before year end, Openpay Group Ltd (ASX: OPY) would also join the ASX at a listing price of $1.60.

2020 saw players including Laybuy Holdings Ltd (ASX: LBY) and Payright Ltd (ASX: PYR) complete successful listings.

Rather than focusing on how the Afterpay share price performed during this period, it might be worth noting that earlier initial public offerings (IPO) such as Splitit and Sezzle have been able to trade well above listing prices, up 165% and 595% respectively.

However, later comers Laybuy and Payright have all struggled to deliver shareholder value, plummeting 66% and 56% below listing prices.

Big banks want a slice of the pie

Australia's largest banks haven't wasted time to join in on the emerging BNPL space, either establishing partnerships with BNPL providers or launching their own products.

In September last year, Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd. (ASX: NAB) both launched new, interest-free credit cards in an attempt to disrupt the BNPL market.

Between 31 August and 9 September 2020, the Afterpay share price tumbled 20%, from $88 to lows of $70.

But by mid-October 2020, Afterpay shares had rallied back up to breakeven.

According to the Australian Financial Review, "Interest-free credit cards are nothing new and unlikely to be felt by Afterpay in the Australian market given its dominance".

More recently, CBA is upping the ante, revealing an in-house BNPL offering called "StepPay".

This news broke out in late May, right before a 40% surge from $92 to $130.50 between 1 and 24 June.

What's next for the Afterpay share price?

This time around, it's US$2.48 trillion giant Apple, which is eyeing a potential entry into the BNPL sector.

Commenting on the situation, Shaw and Partners portfolio manager, James Gerrish said that:

Arguably the biggest issue over the coming months for this volatile sector is sentiment, it's definitely unlikely to be good following this news and a further 20-25% fall by local leader Afterpay (APT) for example wouldn't be a surprise, especially considering it's well within the usual swings of both the sector and stocks.

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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