Afterpay’s share price could come under further pressure in the next week amid mounting industry speculation that global payments giant PayPal is preparing to launch a buy now pay later business in Australia.
Senior payments industry sources in Sydney and Melbourne told Banking Day on Tuesday that an official announcement regarding a local roll-out of PayPal’s North American “Pay in 4” buy now pay later platform was imminent.
The sources said PayPal was likely to begin marketing its BNPL offer in the middle of the year after distribution deals with leading retailers were negotiated.
“They’re coming – expect an announcement in the next week or two,” one of the payments industry sources said.
PayPal is a longstanding provider of instalment credit to US consumers but only launched its “Pay in 4” platform in September to compete directly with Klarna, Afterpay and other BNPL monoliners.
It markets other pay later services to US consumers through a suite of brands that includes “Easy Payments” and “PayPal Credit”.
PayPal Credit offers a revolving facility that levies no interest on purchases if US consumers are able to repay drawdowns within six months.
While PayPal has more than 40 million accounts through its various instalment finance schemes, the Pay in 4 platform reported having a customer base of 3 million at the end of December.
Klarna is the largest BNPL monoline provider in the US with around 15 million customer accounts. Afterpay recently disclosed it has 8 million US customers.
PayPal’s entry into the local BNPL market poses a strategic threat to Afterpay and Zip given that it already services 7 million customer accounts in Australia.
Investor support for ASX-listed BNPL providers has been tested in recent weeks amid concern for the sector’s medium term earnings prospects.
Afterpay, which had a market worth of $44 billion when its scrip peaked at $160 last month, has shed almost 27 per cent after closing at $107.19 on Tuesday.
Zip has copped an even bigger hiding, with its share price falling more than 38 per cent to $8.78.
The launch of an Australian BNPL offer is also fuelling conjecture that PayPal might be considering a wider rollout of point of sale(POS) services to local merchants.
In the UK, France and ten other countries, PayPal is a direct competitor to Square in the provision of POS payments processing and data management services to merchants.
PayPal markets its POS platform under the Zettle brand, which last month was registered with local trade mark regulator, IP Australia.
Zettle is an app-driven management system that integrates in-person digital payments with cashflow management, inventory tracking and live sales reports.
Businesses can also link data generated by Zettle POS terminals with a PayPal merchant account.
As reported in Banking Day yesterday local merchant solutions provider Quest Payment Systems has responded to the strategic threat posed by Square’s merchant offer by developing an app-based platform that allows retailers to accept card payments on any android device.