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Afterpay, Zip attempt to soothe market jitters as coronavirus concerns mount

Afterpay and its buy now, pay later rival Zip have attempted to quell growing market jitters that the coronavirus could trigger a wave of defaults from their younger shoppers and also impact on the extensive debt funding needed to support their consumer finance business models.

“We are well prepared to respond to any changes in customer repayment behaviour, however, we have not seen any changes relative to past performance,” said Afterpay in a statement to the ASX on Friday which was provided in response to “market enquiries”.

The sharemarket is worried that lowly paid Millennial shoppers may provide a coronavirus-induced headache for buy now pay later providers like Afterpay.

The sharemarket is worried that lowly paid Millennial shoppers may provide a coronavirus-induced headache for buy now pay later providers like Afterpay. Credit:Louie Douvis

An ASIC report in 2018 said around 44 per cent of buy now, pay later customers had an income of less than $40,000 a year and there were already indications of a real risk that such commitments could contribute to financial overcommitment by users.

Afterpay also reassured the market that the debt needed to fund the billions of dollars of transactions by its customers is also secure, stating that funding its billion dollar warehouse facilities “are not subject to traditional debt facility covenants.”

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