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ASX BNPL Wrap: Block Inc leads sector in February as market consolidation speeds up
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It was once the hottest segment on the ASX, but over the past year BNPL stocks have been struggling to find their feet.
Amid a rising interest rates environment and increasing competition, the sector has been one of the worst performers on the ASX.
This is the first time BNPL companies have ever had to face a rising rate cycle, and experts believe they will find it difficult to maintain net margins.
Intense competition from big banks and multinationals like Apple and Paypal who are entering the fray has also made it all the more difficult.
Following Afterpay’s decision to sell itself to Square, now Block Inc (ASX:SQ2), in October last year, other BNPL players have been scrambling to find scale to compete.
As a result, the sector has undergone a consolidation period with a couple of major mergers in the past month.
In February, we saw Zip Co (ASX:Z1P) taking over Sezzle (ASX:SZL) in a cash and scrip deal worth almost $500 million.
The merger, which was supported by both company boards, is aimed at giving the businesses greater scale in the crucial US market, where the BNPL firms are trying to take on a deep-seated shift away from credit cards.
Just a week earlier, financial group Latitude (ASX:LFS) had acquired Humm Group’s (ASX:HUM) consumer business, which includes BNPL, instalments and cards in a deal valued at 335m.
With 2.6 million customers and over 60,000 merchant relationships, Humm is one of the leading BNPL, instalments and cards provider in Australia and New Zealand with net receivables of $1.8 billion.
Latitude said the acquisition will accelerate its BNPL strategy, as it vies with other operators in signing up customers and merchants.
BNPL stock prices in February
| Code | Name | Price | % Change | Market Cap |
|---|---|---|---|---|
| SQ2 | Block | 175.435 | 17.5% | $14,812,196,256 |
| HUM | Humm Group Limited | 0.895 | 9.1% | $435,836,120 |
| FFG | Fatfish Group | 0.051 | 4.1% | $51,806,494 |
| CI1 | Credit Intelligence | 0.012 | 0.0% | $19,232,682 |
| LFS | Latitude Group | 1.935 | -2.0% | $2,004,230,768 |
| SPT | Splitit | 0.2 | -9.1% | $82,294,913 |
| NOV | Novatti Group Ltd | 0.24 | -15.8% | $78,794,917 |
| IOU | Ioupay Limited | 0.185 | -15.9% | $99,254,172 |
| DOU | Douugh Limited | 0.04 | -23.1% | $22,766,731 |
| SZL | Sezzle Inc. | 1.785 | -23.7% | $352,398,966 |
| PYR | Payright Limited | 0.1525 | -28.2% | $10,482,133 |
| Z1P | Zip Co Ltd. | 2.09 | -28.9% | $1,301,325,094 |
| OPY | Openpay Group | 0.37 | -31.5% | $45,975,629 |
| LBY | Laybuy Group Holding | 0.105 | -46.2% | $23,443,366 |
| ZBT | Zebit Inc. | 0.05 | -76.2% | $4,731,761 |
Block Inc led the way, after its stock price surged over 30% last week following a Q4 trading update by its US parent.
Although Block’s revenue of US$4.1b had matched estimates, its gross payment volume (GPV) came in at $46.3 billion and surpassed expectations.
Block is yet to fully integrate Afterpay into both its Square seller ecosystem and Cash App mobile payment app.
Payright (ASX:PYR) delivered a record Gross Merchandise Value (GMV) of well over $34m, but it hasn’t escaped the broader BNPL selloff. Its stock price is down almost 30% in the past month.
OpenPay (ASX:OPY) achieved its highest-ever monthly total for transaction volume ($34.6m), and told investors its intention to focus on growth in the US market.
Since its October launch, OPY said its US platform has “begun onboarding dentists, veterinarians, and auto dealers across the US”.
The OPY share price was down 31% this month, which marks a fall of more than 80% from OPY’s all-time highs of $4.70 in August 2020.
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