Afterpay Banking Ambitions Take Shape
(16 June 2021 – Australia) Afterpay is set to outline its banking plans initially built from white labelled Westpac transactional services.
Analysts estimate the banking play could double Afterpay’s Australian revenue within the next four years while critics admit the growing popularity of its buy-now-pay-later (BNPL) products as an alternative to credit cards is established, challenges are emerging in the form of rising competition and tighter regulatory controls, also highlighted in 2021 predictions for East & Partners January Research Note Banking Outlook.
Investment bank Jarden stated in a report it believes the 27 million monthly leads Afterpay sends to retailers, through its shop directory and loyalty schemes, meant it was increasingly valuable as an advertising marketplace business.
The Reserve Bank of Australia (RBA) investigated BNPL operators practice of banning merchants from passing on higher costs through a surcharge, seemingly making Afterpay appear “free” to consumers. The RBA opted against banning the practice in May, but said that could change in the future. UBS points to the ongoing debate of surcharging as Afterpay seeks to become a mainstream payment method, an area of weakness being the inherent relative inhibitive cost to merchants.
“Afterpay costs merchants four percent of the purchase price, compared to average payment costs of less than one percent for debit cards” commented UBS Analyst, Tom Beadle.
“This will make it hard for Afterpay to become a truly global player with up to US$300 billion in annual in transaction volume, let alone a business on the scale of PayPal, which processes about US$1.2 trillion in payments at a cost to merchants of 1.2 percent. It’s an example of a disruption of a fairly competitive industry with a less efficient solution” Beadle added.
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