Afterpay, Zip plunge as ASX BNPL stocks feel the heat from Apple, Paypal competition

ASX listed buy-now-pay-later (BNPL) shares were hammered this morning, with stock prices on the two biggest players Afterpay (ASX:APT) and Zip Co (ASX:Z1P) plunging by around 9~10%.

The sharp falls came in the wake of a report from Bloomberg that said Apple has partnered with banking heavyweight Goldman Sachs, and plans to develop a BNPL option for its customers.

Although Apple declined to comment, it’s clear the company wants to expand its current Apple Card offering into a bigger financial services product that utilises its Wallet app.

After the news was published, Nasdaq-listed Affirm, which is Afterpay’s biggest competitor in the US, tanked by more than 10%.

The US shares of Afterpay listed on OTC Markets also dropped by 6% last night.

Afterpay is also facing more competition from Paypal in Australia, after the payments giant launched the “Pay in 4” instalment option, and made it available to 9 million Australian consumers today.

Paypal’s Pay-in-4 will do away with late fees charges, putting pressure on Afterpay’s revenue model, which made $70 million last year on these fees.

The decision by Paypal not to charge late fees came following a report by corporate regulator ASIC last year, which criticised the practice.

Paypal has said that people who miss a payment do so “by mistake, not by design.”

On the merchant side, Paypal will also undercut Afterpay, after saying that it will not raise its merchant fees in Australia, as it has done in the US.

BNPL competition heats up

Competition in the BNPL segment continues to heat up in Australia, with several platforms popping up, some of which are backed by big banks.

The Commonwealth Bank (ASX:CBA) for example, is about to launch its much anticipated StepPay in August.

StepPay is a digital-only card with BNPL options that can be added to the CommBank app or digital wallet on the smartphone.

The card can be used by tapping in-store or to shop online anywhere where Mastercard is accepted, without needing a physical card.

The launch of StepPay follows another product by the CBA called the Commbank Neo, a credit card which was launched last December and charges no interest.

The Neo is dubbed the first 0% credit card, and said to provide an alternative to BNPL for Aussie consumers, but data shows that a purchase made on this card is more expensive than on a card with interest.

Other ASX stocks to feel the heat on today’s news include Sezzle (ASX:SZL), which dropped by 9%, and Splitit (ASX:SPT), which fell by 4%.