Afterpay, Zip and others are about to be disrupted by a new BNPL competitor

There is about to be more BNPL competition for Afterpay Touch Group Ltd (ASX:APT) and Zip Co Ltd (ASX:Z1P).

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Watch out Afterpay Touch Group Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P) and others, there's some new buy now, pay later (BNPL) competition coming.  

According to reporting by the Australian Financial Review's Street Talk, New Zealand based business Laybuy will soon be aiming to hit the boards of the ASX with a listing.  

What is Laybuy? 

It's a similar concept to the others with an instalment system.  

First, customers set up an account and then Laybuy performs a credit check to verify details and apply a Laybuy limit.  

There are no sign up fees, and customers only pay the price of the purchase if they pay the instalments are paid on time. It can be done for products online or in-store. The instalments are split into six automatic weekly payments on the day the customer chooses.  

A late fee of $10 or £6 may be applied for each missed payment. You may notice the British pound there – Laybuy is currently expanding in the UK. According to materials seen by Street Talk, Laybuy expects to make 73% of its gross merchandise volume (GMV) from the UK by March 2021.  

How big is Laybuy?  

It's the market leader in New Zealand and it has approximately 4,300 merchants with 410,000 consumers.  

According to the AFR, Laybuy made $6 million of revenue in the 12 months to September 2019, excluding late fees. In FY19 it saw $115 million of GMV. By 2021 it's aiming for $677.6 million of GMV.  

Is this bad news for Afterpay? 

Another BNPL business on the ASX doesn't change things for Afterpay in share market terms, particularly as Laybuy is only aiming for an initial market capitalisation of $200 million.  

However, more competition in the BNPL space could affect the actual operations a little, particularly if Laybuy takes away UK growth from Afterpay. 

As time goes on we'll see if consumers treat different BNPL players as being brands or just as commodities. For Afterpay's sake I hope it has a strong economic moat to protect against all these new competitors.  

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

More on Growth Shares

A fresh-faced young woman holds an Australian flag aloft above her head as she smiles widely on a beach as though celebrating a national day or event where Australia has been successful.
Growth Shares

The best Australian shares to buy with $1,000 right now 

Analysts think these shares could be great options for Aussie investors when the market reopens.

Read more »

A young man goes over his finances and investment portfolio at home.
Growth Shares

Why earning 4% to 5% in a term deposit 'isn't that attractive'

The upside is capped on the most risk-less investments.

Read more »

A woman makes the task of vacuuming fun, leaping while she pretends it is an air guitar.
Growth Shares

Overinvested in WiseTech shares? Here are two alternative ASX growth stocks

WiseTech shares are great, but there are other exciting growth stocks out there.

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Growth Shares

These ASX 200 growth shares could rise 65% and 100%

Big returns could be on offer for buyers of these shares according to analysts.

Read more »

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, holding a mobile phone in his hand while thinking about something.
Growth Shares

Is this growing ASX 300 stock a top buy?

Let's see what analysts are saying about this high flying company.

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Growth Shares

3 excellent ASX growth shares to buy for market-beating returns

Let's see why analysts are feeling bullish about these growing companies.

Read more »

A man and woman sit next to each other looking at each other and feeling excited and surprised after reading good news about their shares on a laptop.
Growth Shares

4 ASX shares to buy now and hold for a lifetime in your super fund

Analysts have very good things to say about these stocks.

Read more »

Man smiling at a laptop because of a rising share price.
Investing Strategies

This fund manager delivered 42% gains in one year. Here are the top ASX shares it owns

Growth funds continue to deliver the goods for ASX investors.

Read more »