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Buy Now Pay Later (BNPL) Stocks - which one and why?

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kenny

kenny

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I'm interested in hearing everyone's views on this sector.

How does one compare each of them and importantly assess each new entrant as they list with shiny promises?

Openpay Pty Ltd lists soon which is an aggregation of multiple BNPL businesses such as JAM Payments and Evoke Autopay.

What metrics would be useful to compare them?

When does the consolidation start and the small players get eaten?

Some listed players include;
  • Afterpay Touch Group Ltd (ASX: APT)
  • Zip Co Ltd (ASX: Z1P)
  • Splitit Payments Ltd (ASX: SPT)
  • FlexiGroup Limited (ASX: FXL)
  • Quickfee (ASX: QFE)
  • Sezzle Inc (ASX: SZL)
Unlisted ones include;
  • Affirm
  • Klarna partnering with CBA
  • Latitude
  • QuadPay
  • many startups eg Quicka (for tradies), Cloudfloat and PayRight target niches
  • VISA is trialling their own BNPL offering which will worry SPT holders
  • Mastercard bought BNPL platform; Vyze in April 2019
  • Other countries have their own home grown ones eg Singapore's Rely and Grab's Pay Later service.
 
So when you ask for everyone's views, I guess everyone is being polite and saying to each other "you go first..., No no, you go first, I insist. Ladies before gent's etc" :rolleyes:

This " Sector ", am I missing something there? o_O

I thought Incentiapay owned Latitude... I could be wrong though, wouldn't be the first time...
Out of your listed list, I have only had dealings with dafterpay and zip. Heard of Split It and maybe something about it doing ok in USA ?
Could be wrong, again...:thumbsdown:

I have been looking at INP Incentiapay recently and wondering where they went wrong. (they, not me, I don't hold, but it is an interesting beast with some long teeth...and def worthy of consideration)
Maybe it's a case of complacency gone terribly wrong by not keeping up with rapidly changing financial revenue markets, however there seems to be a chance that the current intended shakeup may revive the SP. Time will tell.
Can't help you with any metrics, unless you need it to the millimetre. :cool: Left 20, Right 10, Mark!
F.Rock
PS; Ladies to the left, gent's to the right, chicken pluckers- up here with me! Form an orderly queue to respond.
 
It's a complex area.
I still like Afterpay, Zip is good at what it does, Latitude is a bit pathetic, SPT is just a rather average app which won't be around in two years,
Karma Could be a big competitor to Afterpay internationally.You can expect more international competitor to Afterpay.
Sezzle is a USA Afterpay clone but I can't see it getting enough market share. Could be wrong.
 
I failed to mention that 2 brokers recently
updated their recommendations on dafterpay.
Upgraded to buys with targets of $45 thereabouts, one was bell poopers, can't remember the other.
F.Rock
 
I bought in and out of APT last year. I did okay, made some money, but certainly would have done a lot better if I held on for the big multibagger. Over the last couple of years I seem to consistently buy at good times and sell at bad times.

APT is at the top of your list, not surprisingly. It's extremely difficult to evaluate, it's not like a cake company where you have relatively fixed overheads, a relatively consistent cost per cake and a sale price, so profits largely depend on sales. It's not like an oil company where you have a cost of production and profits will simply depend on the price of oil. APT could be anything from something which never makes a profit to something which becomes a massive company which is still a hugely profitable blue chip gig in 20 years. There are so many variables. Comparing them to each other is also very difficult. A great deal of future success is already priced into APT, which obviously makes it dangerous, but if you believe in the blue sky scenario of APT, it's still a multibagger from here.
 
I like Sezzle who are focusing on the Canadian market. They all should report excellent customer acquisition and growth over this Christmas period.
 
A lot has changed in this space.
A lot will change again.
Regulation is set to be pushed hard by "entities" soon enough.
Caution required, as @qldfrog is now famous for saying,
"It's not all lollipops and candy".

Hoping others can add value to this discussion.
 
I found @aus_trader made an interesting comment on his selection in the speculative stock portfolio thread about QFE. This was a couple of months ago after reviewing some BNPL companies. Not sure if Aus has anything to elaborate with. (Apologies for being so presumptuous @aus_trader)
 
My gut feeling.

BNPL's seem to be biting in to the massive CCard market and if successful will be great stocks to own.

I can't see the Visa's etcs sitting back and watching there huge profitable market be taken from them.
I think if Visa offered a BNPL option instead of CC option, its huge worldwide operation would swamp many of these BNPL's. Initially their profits are still upthere and don't want to compete against themselves but I think a time will come when they need to stamp out the opposition.
 
jbocker said:
I found @aus_trader made an interesting comment on his selection in the speculative stock portfolio thread about QFE. This was a couple of months ago after reviewing some BNPL companies. Not sure if Aus has anything to elaborate with. (Apologies for being so presumptuous @aus_trader)
Click to expand...

No worries jbocker, I don't mind any questions, I'll answer as best as I can.

I mentioned BNPL sector has been the hottest group of stocks that led the recovery from the huge sell off earlier this year. Quite a few of these stocks made new high's that surpassed pre-Covid high's and rocketed through the 'blue sky' space.

The speed of the surge has slowed and in some of the leaders, there is a little pull back that is happening right now. So I will hold onto QFE in Speculative Stock Portfolio for now and watch what happens. There could be further upside if customers further adapt to BNPL fintech firms in place of Credit Cards for payments...
 
aus_trader said:
I mentioned BNPL sector has been the hottest group of stocks that led the recovery from the huge sell off earlier this year. Quite a few of these stocks made new high's that surpassed pre-Covid highs and rocketed through the 'blue sky' space.

The speed of the surge has slowed and in some of the leaders, there is a little pull back that is happening right now. ...
Click to expand...
hot stocks; as mentioned by @Austwide and others, I too was surprised the Visa & M/Card fightback wasn't there, so the early players got ahead. But there is no real moat apart from First Mover Advantage. apart from the Aussie BNPLers, numerous others exist in other markets. And turning into businesses that make profits, rewarding shareholders when the growth 'consolidates'. And that is the other concern; customers. .. are they going to be loyal and profitable. Consumerism and purchases brought forward can only go so far,

Found this, about APT, but applies for all of them as they evolve and shake outs loom:
"Most of the popular focus on Afterpay, which reports its full year results on August 27, and the other buy now, pay later stocks is on top line growth numbers. Revenue is a function of the size of the customer base and merchant network, driven by overall transactions made on the system and the average value of those transactions per user.

But more attention is focusing on the bottom line. Investors hone in on the net transaction margin. Essentially, this examines how much the company is making after bad debts, processing costs and funding costs are subtracted from the merchant and late fees revenue. It reflects that, like banks, buy now, pay later profits need to be offset by the customers who don't pay.

For now, generous government stimulus packages have been back-stopping bad debts and encouraging spending... so bad debt levels at Afterpay, Zip and the other players have remained low. Short repayment cycles and capped spending amounts for new customers help (users can get access to more credit over time after proving themselves).

In future results, investors should watch Afterpay's consumer adoption, gross merchant volume and revenue margins and form a view around where these metrics can grow to over the long term We favour Afterpay's simple and free instalment solution, which has a proven track record of rapid consumer adoption upon launch in new geographies, said an analyst

This land grab for global scale is forcing the main players into losses, which for now investors are willing to tolerate. They understand there are likely to be only be a few winners globally, and getting to scale requires serious investment in marketing, R&D and staff."
 
Austwide said:
My gut feeling.

BNPL's seem to be biting in to the massive CCard market and if successful will be great stocks to own.

I can't see the Visa's etcs sitting back and watching there huge profitable market be taken from them.
I think if Visa offered a BNPL option instead of CC option, its huge worldwide operation would swamp many of these BNPL's. Initially their profits are still upthere and don't want to compete against themselves but I think a time will come when they need to stamp out the opposition.
Click to expand...

I see a banks are starting to offer BNPL
Monthly fees are high

NAB has rolled out Australia's first no-interest credit card to hit back at buy now pay later (BNPL) services. While users will not incur interest on expenses put on the bank's new credit card, StraightUp, a flat monthly fee of up to $20 will be charged for a maximum credit limit of $3,000.
 
Austwide said:
I see a banks are starting to offer BNPL
Monthly fees are high

NAB has rolled out Australia's first no-interest credit card to hit back at buy now pay later (BNPL) services. While users will not incur interest on expenses put on the bank's new credit card, StraightUp, a flat monthly fee of up to $20 will be charged for a maximum credit limit of $3,000.
Click to expand...
That monthly fee sucks and for that limit. I have CCs with no fees and no interest. Just have to set up autopay pay out the closing balance for each month. In one card I did see a few months ago a capacity to stage payments for a larger bill, I did had a think about what value that was to me, but didn't take it up. I will try to find that detail and review what costs there were I dont recall detail or fees. Maybe it was a guinea pig offer.
Not used a BPNL maybe I will if I buy from Ebay soon.
 
frugal.rock said:
A lot has changed in this space.
A lot will change again.
Regulation is set to be pushed hard by "entities" soon enough.
Caution required, as @qldfrog is now famous for saying,
"It's not all lollipops and candy".

Hoping others can add value to this discussion.
Click to expand...
of course, as there is a Klarna association, this needs to be taken in context: from Matt Comyn, CEO, Commonwealth Bank of Australia Ltd
"What the buy now, pay later sector has done well and successfully is convince [merchant] customers ...they are getting more than just the payment, that they are providing an acquisition channel for new customers, they are helping to increase basket size... Businesses are effectively funding the buy now, pay later opportunity for customers”
Click to expand...
and
“[Referring to BNPL] Generally what happens, as industries or products become much larger and popular and usage expands, is there will be more scrutiny on the consequences and vulnerabilities customers may have."
Click to expand...
 
I was thinking more along the lines of bill smoothing and salary smoothing. Has COVID accelerated, or will it accelerate changes in the way the workforce traditionally receives wages.
This is paraphrased from the article i quoted above...
 
jbocker said:
In one card I did see a few months ago a capacity to stage payments for a larger bill, I did had a think about what value that was to me, but didn't take it up. I will try to find that detail and review what costs there were I dont recall detail or fees. Maybe it was a guinea pig offer.
Click to expand...
It was Westpac Smartplan, they do allow staged payments but add interest (from what I can determine) if you take up the offer after the standard interest free period. It all gets calculated and agreed. More detail on the site and it is marginal to suggest its a BPNL style offer.
upload_2020-9-11_15-7-18.png
 
Credit cards have had 55 days interest free and the like offers since forever.

This is not a new concept.
 
Re the banks whining...

Yes, there are certain entities which wish the BNPL industry didn't exist.

I suspect it's mainly the entity's that haven't invested in it from early on.
EG; Westpac have somewhere around 10.9% ownership of Z1P so you don't hear them whinging and whining...
 
I was referring to the staged payments. The bank offers these on certain (single) larger purchases within your buying list. Its quirky and clunky, was not of interest to me. I thought it was some attempt to smooth payments, but I could be talking horse manure (not uncommon).

Where I can, I schedule out a whole years payments through credit card and have them paid off by a auto deduct from an offset. The shire repayments for properties has been interesting this year, some shires / cities offering no fees or penalty interest and able to pay weekly or monthly for most of the year.
Set it all up once and forget for the rest of the year.
For the more sporadic billing (repair maintenance) I use a different CC but still payoff closing balances by auto deduct.
Download the credit card history and code to different properties / entities with the invoice/receipt (which are property and Date coded). Hand it to the tax man.
Living expenses by debit card or cash.
Apologies I have digressed....
 
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