Global giant PayPal is set to take on Afterpay and Zip on their home turf, in a sign of the growing competition in the fast-growing buy now, pay later sector.
PayPal will on Wednesday announce plans to offer a buy now, pay later (BNPL) service to its 9 million customers in Australia from June, after a global launch last year flagged its intention to get a piece of the booming sector.
The digital payments company, which has posted rapid growth in the United States BNPL market since launching last year, said the move into Australia’s BNPL sector was a response to strong demand from customers and merchants alike.
PayPal Australia’s general manager of payments, Andrew Toon, said the company had been inundated with requests for the service from its Australian business customers, which number in the hundreds of thousands. “They’re looking for us to be able to deliver choice and flexibility to their customers in the PayPal checkout,” Mr Toon said.
The move reflects growing competition in Australia’s market, which accounts for a quarter of Afterpay’s total customers and about 40 per cent of Zip’s customers, according to recent half-year results.
Chief executive of payments consultancy McLean Roche, Grant Halverson, said PayPal would be well placed to cross-sell BNPL products to its customers, as he predicted its entry into the Australian market would squeeze Zip and Afterpay’s profit margins
“In six months in the US, they got 45 million BNPL customers with the same product,” Mr Halverson said. “They would be the biggest threat to come here.”
When PayPal announced it would offer BNPL products in September last year, Afterpay and Zip played down the competitive threat, with Zip saying there was plenty of room for multiple players, while Afterpay argued its platform did more than just arrange payments.
The move comes alongside a separate plunge in BNPL sector shares, with Zip and Afterpay stocks falling sharply in recent days in response to rising bond yields, a trend that has triggered a global sell-off in high-flying technology stocks. Afterpay fell 3.6 per cent on Tuesday to $107.19, and the stock is now more than 30 per cent below its February peak. Zip shares fell 1.6 per cent to $8.78, and are 37 per cent below their highs of last month.