The Zip Co Ltd (ASX: ZIP) share price has continued its slide on Wednesday.
In afternoon trade, the buy now pay later (BNPL) provider's shares dropped 6% to a new multi-year low of 61.7 cents.
Why is the Zip share price falling again?
Investors have been selling down the Zip share price this week amid concerns over the impact that Apple's BNPL launch will have on the market.
The tech giant's BNPL offering, named Apple Pay Later, allows users to split the cost of an Apple Pay purchase into four equal payments with no interest.
However, importantly, the service works with any merchant that already supports Apple Pay and does not require a new payments terminal. If you're like me and use Apple Pay so much you don't really know where your physical cards are any more, you'll know that this means practically every payment terminal out there (I've yet to find one that doesn't).
This means that the seller doesn't even need to offer BNPL as an option to customers nor would it even necessarily know if a sale was made with the payment method. For that seller, the sale is done and the money is heading to their bank account.
And while Zip and others offer this function already with single-use virtual cards, non-integrated merchant transactions generate low margins. This could make it very hard for BNPL providers to turn a profit from a transaction if this becomes the norm and merchants start slipping off their books. Whereas Apple is already earning from each use of Apple Pay, so these low margins are manageable.
Furthermore, as Apple already has a captive audience using Apple Pay every day, it won't be hard for it to market the service to users. Whereas Zip, Sezzle inc (ASX: SZL), and co won't have that luxury and will be forced to continue spending big bucks to promote their services to consumers.
Overall, these are interesting times for Zip and the BNPL industry.
