PayPal hits its Australian competition with ‘buy now, pay later’ facility

By Rahul Vaimal, Associate Editor
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US-based online payment giant PayPal is expected to launch its “buy now, pay later” (BNPL) option in Australia in June, putting further pressure on its competitors Afterpay and others for a share in the booming industry.

So far, PayPal’s latest BNPL has only been available in the US and the UK, where it claimed to have processed more than $750 million in transactions by the end of the December quarter.

The payments giant aims to offer its interest-free “pay in 4″ services to its 9 million+ Australian customers where regulation of the fast-growing space is light relative to other consumer finance categories, while adoption is higher than other markets.

PayPal’s launch is a serious competition to domestic market leaders Afterpay and Zip Co Ltd, as well as Sweden’s Klarna, which is backed by a tiny shareholding from Australia’s largest bank.

Mr. Andrew Toon, the General Manager of Payments at PayPal Australia pointed out that after the offshore launch of PayPal’s BNPL service last year, the company had been “overwhelmed” with requests from Australian merchants and businesses.

PayPal intended to leverage its long-standing partnerships with Australian merchants, but not to the point of finding exclusive agreements that would force out other BNPL providers Mr. Toon further added.

Investors and analysts were concerned when the company announced last year that it would enter the BNPL market, fearing that its deep network of retailers and lower merchant fees might eat into the incumbents’ growth.

Mr. Steven Ng, the Co-founder and Senior Portfolio Manager at Ophir Asset Management, which owns Afterpay shares commented that “the big question is whether (PayPal) gain incremental sales as in a potentially different customer base, or do they simply take share away from incumbents”.

Shares of Afterpay which have been hammered in recent weeks by the global tech sell-off, were up more than 8 percent at the close of trade, while Zip was down 3.6 percent.

“You shouldn’t underestimate Paypal’s size and technical firepower in competing against existing players,” Mr.Ng said, adding that rivalry sees furthermore innovation and help BNPL capture a larger share of the overall payments market.

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