BNPL becomes a global phenomenon with Afterpay, iSentric expanding

Australia’s buy now, pay later (BNPL) phenomenon is spreading worldwide with Afterpay Touch (ASX:APT) pursuing expansion plans in Europe and fintech company iSentric (ASX:ICU) bringing the successful concept to its home market of Malaysia.

This week has seen Afterpay trade close to $100 per share, surpassing price forecasts revealed only a month ago for the supercharged stock.

Not to be outshone, Zip Co’s (ASX:Z1P) share price leapt 25 per cent on Wednesday to $9.49 on news the BNPL company would provide lines of credit to eBay retailers.

The sky really does seem to be the limit for BNPL, which has enjoyed rapid popularity in Australia, also the home of Afterpay and Zip Co.

“BNPL is a global phenomenon and I expect will ultimately be available in various guises in any market where there is payments and mobile payments infrastructure,” Martin Pretty, director of investment firm Equitable Investors, said.

Societal changes in payment methods, especially among young people, is driving BNPL.

“Instant gratification in conjunction with a generational shift away from credit cards are likely common drivers,” Pretty said.

Price targets for Afterpay smashed

Investment house Bell Potter came out in early July with a price target for Afterpay of $81.25/share, then trading at $68/share, which some at the time saw as very ambitious.

It is worth remembering that Afterpay’s share price was only $8.90 in March, and now the company is valued at $25.5bn.

Analysts at Bell Potter are forecasting earnings for Afterpay of $1.3bn in the 2022 financial year, driven by higher customer numbers, retail partnerships with online firms such as eBay, and expansion in Canada, Europe and the US.

Pretty had some words of caution for investors piling into BNPL stocks, as he pointed to the performance of stocks in the cannabis and lithium sectors as a possible future guide for BNPL.

“Valuations in the sector are incredibly optimistic, and at some point there will be a reckoning where the weaker BNPL businesses will be exposed,” he said.

“Once several early movers are successful, like Afterpay and Zip, and embraced by the market in a new industry, you can be sure a whole range of entrepreneurs and brokers will create and IPO a series of similar businesses to meet investor demand.”

European expansion on Afterpay’s agenda

Afterpay delivered answers on its overseas expansion plans this week, when it announced its purchase of European BNPL and credit services provider Pagantis, which operates in France, Spain, Italy and soon Portugal.

“Afterpay has identified the European Union as the next logical step for international expansion due to its large millennial population, vast fashion and beauty retail markets, and significant debit card usage,” the company said.

“The BNPL sector remains nascent or non-existent in many EU countries, presenting an opportunity to capitalise on first/early mover advantage.”

Pretty said some BNPL companies like Sweden’s Klarna had pioneered the concept, and was now operating in Australia in partnership with Commonwealth Bank.

iSentric rolling out BNPL in Malaysia

This week, investors in iSentric were told the fintech company was changing its name to IOU pay in line with the brand name of its digital payments and mobile banking platform.

The company will add BNPL transaction and payment processing capabilities to its IOU Pay Platform, which has existing relationships with large corporate and government businesses ranging from telcos and big brand retailers to utilities and banks.

“The real focus of the BNPL platform development is around data driven product packaging for qualified consumers and BNPL payment processing,” ” iSentric Malaysia’s chief finance officer Kenneth Kuan told Stockhead.

“That is where the growth is in the business.

“We already have telecoms and banks as customers, and it is relatively easy to add a BNPL offering. The scope for BNPL is massive in Southeast Asia.”

Equitable Investors’ Pretty said he understood iSentric’s business move in Malaysia.

“In southeast Asia, I understand that cash has been king and the value of transactions may be lower, but mobile payments and e-wallets are highly competitive and growing markets, so you can see BNPL being adopted as a product differentiator,” he said.

APT, ICU and Z1P share price charts

BNPL stocks perform better on Fridays

Meanwhile, some interesting research from Melbourne’s RMIT University has identified a tendency for ‘speculative’ stocks, including those in the BNPL space, to perform better on Fridays – thanks to a sense of end-of-the-week euphoria.

“Overall, we find that investors’ decision-making process in the stock market is affected by mood swing across weekdays,” said RMIT University senior lecturer Angel Zhong, an expert in investor behaviour.

“Mood improves gradually from Monday to Friday, ranging from the Monday blues to ‘thank goodness its Friday’,” Zhong said.

“That means on average, BNPL stocks such as Afterpay and Zip tend to underperform on Monday and Tuesday, but outperform on Friday.”

At Stockhead, we tell it like it is. While iSentric is a Stockhead advertiser, it did not sponsor this article.