Why the Afterpay share price went up 19% today

Here's why the Afterpay Touch Group Ltd (ASX:APT) share price went up 19% today.

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The Afterpay Touch Group Ltd (ASX: APT) share price rose by 19% today, making it one of the top performers in the ASX 200.

Although the Senate Committee inquiry into buy now, pay later credit providers dropped on Friday, we only saw the official Afterpay reply and the market's response today.

Importantly, Afterpay said that it does not expect any material impact on the business or business model based on the recommendations in the report, calling the inquiry's recommendations "sensible, appropriate and proportionate".

According to Afterpay's market release, the Senate Committee process highlighted the important fundamental differences between the buy now, pay later sector compared to traditional credit products, and the need for separate regulations outside of the National Credit Code. Indeed, Afterpay said that there were comments in the report saying that Afterpay had introduced additional competition and reduced the need of traditional credit for some of its consumers.

Afterpay re-iterated that first-time customers have low initial limits and have 25% of the purchase price upfront. If a person is late on the second payment two weeks later (or any future payment), the account is immediately frozen.

Afterpay also said that it is aligned with policy-makers in that service providers need to find ways to collaboratively utilise technology and share information to ensure that a small segment of the population is prohibited from using services that are not suitable for them. This sounds good for everyone in the long run.

Foolish takeaway

This seems like a victory for Afterpay, or at least not a defeat, with the status quo being maintained. Afterpay's model does seem much more sustainable than other ones based on high interest rates or high fees – that's partly why Afterpay is so popular.

Afterpay is far too expensive for me to call it a buy for my portfolio trading at 152x FY20's earnings, but I hope it can continue to significantly grow overseas and become a large global player for paying for goods and services.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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