Afterpay co-founder and Aussie billionaire Nick Molnar is none-too-concerned about newcomers into the local buy-now, pay-later sector.
But, one expert says Afterpay has lost the first-mover advantage, and merchants might be thinking twice about what works best for them.
Speaking at the launch of the new Afterpay Card in-store digital wallet solution, Molnar reportedly brushed off competition concerns after PayPal and Commonwealth Bank each announced their own BNPL offerings in Australia this month.
He suggested both CBA and PayPal would have an “inherently difficult time” winning over the millennials and gen Z consumers that make up the bulk of Afterpay’s own customer base.
Other payment providers “haven’t been able to engage with the next generation”, Molnar said, adding that the consumers in this group “have a lot of distrust for many financial institutions but a huge amount of trust for Afterpay”.
Speaking to SmartCompany, Jason Andrew, chartered accountant and founder of SBO, notes that neither of the newcomers are necessarily positioning themselves as an alternative to Afterpay. Rather, they’re simply offering another option to customers.
Retailers — particularly e-commerce retailers — can offer more than one payment option, and most do.
The critical issue is merchant fees. Both the Paypal and CBA offerings are available with no additional fees for the merchants. Paypal’s offering will be included in its existing package for businesses selling through the platform, while CBA’s split payment offering will be available only to CBA customers, and linked to their accounts.
On the other hand, Afterpay charges up to a 6% commission fee on each transaction, and makes the majority of its revenue this way.
It also has rules in place preventing the merchant from passing this fee on to the consumer.
Last week, Andrew penned this piece for SmartCompany, noting that BNPL providers that take a hefty commission can cause more harm than good to retailers, particularly small businesses.
Andrew believes it’s PayPal that has the best chances of competing directly with AfterPay. After all, it’s already recognised as a common payment method for consumers.
Paypal is also a fintech itself, free from some of the stuffiness and mistrust that may be associated with the incumbent banks.
“They are more capitalised than Afterpay — their market cap is currently nine times the size of Afterpay’s,” Andrew adds.
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“And [they] have the balance sheet to squeeze Afterpay’s margins.”
While Molnar is confident in the loyalty of his customer base, there’s a shifting sentiment among socially savvy young people who want to support local businesses and small businesses.
If consumers are clued up as to which payment options are kindest to their favourite brands and boutiques, it’s not a stretch to believe they will choose it.
And, ultimately, the retailers decide which BNPL platforms they offer their customers, Andrew notes.
“If there are more competitive options in the market, they will be thinking twice about whether Afterpay is still the best for their business.”