Afterpay vs Zip? From both a consumer and investor standpoint, I see this question come up online time and time again.
Founded in 2017 in Melbourne, Afterpay Ltd (ASX: APT) is arguably the most well-known buy now, pay later (BNPL) brand in Australia. You have to hand it to the team though. They have their marketing stickers in almost every shop window and on every ecommerce website. The Afterpay business model is essentially short-term, interest-free lending. Similar to a lay-by type deal, but the consumer gets the product instantly.
Zip Co Ltd (ASX: Z1P) was founded in 2009 and just like Afterpay, it is well-known in the BNPL sector. It has a slightly different business model to Afterpay, offering not only BNPL services, but also personal finance management/education through its Pocketbook app. Additionally, Zip offers unsecured loans in different capacities.
Operations and locations
Afterpay has a broad reach, operating in Australia, New Zealand, the United States, Canada and the United Kingdom. It operates through a variety of brands such as Afterpay ANZ, Afterpay US, Clearpay and Pay Now. In August 2020, Afterpay signed off on a deal to acquire Spanish fintech company Pagantis, with the goal to expand its BNPL reach throughout Europe.
Zip is also a major international player, operating in Australia, the United Kingdom, the United Stated, New Zealand and South Africa. The company has multiple brands, including ZIP AU, Zip Global and Spotcap. It offers users digital wallets called either Zip Pay or Zip Money. They are essentially just for different sized purchases.
Afterpay has much more of the European market (after the recent acquisition) and also Canada. Zip has South Africa. In the question of Afterpay vs Zip, aside from those locations, they share a lot of geography.
Financial reports
Afterpay's FY20 results really showed it to be a market leader in the BNPL sector.
- Almost 10 million active users
- 55,000+ partners/merchants
- Revenue of $519.2 million, up 97%
- Earnings before interest, taxes, depreciation and amortisation (EBITDA) of $44.4 million, up 73%
Zip Co's FY20 results were also very strong, but clearly show it to be a much smaller player.
- More than 2 million active users
- Almost 25,000 partners/merchants
- Revenue of $161 million, up 91%
- EBITDA of $3.5 million
Afterpay vs Zip? Afterpay is clearly the bigger player here.
Share price performance
Year to date, Afterpay shares are up around 170%, with the price rising from $29.15 to around $79.52.
Since its initial public offering (IPO), Afterpay shares are up a staggering 2,887%!
Zip shares have risen 91% in 2020, with prices moving from $3.53 to $6.76.
IPO-wise, Zip has been listed for a lot longer than Afterpay. The Zip share price has risen 2,599% approximately.
Looking at the performance, Afterpay shares have offered investors higher returns in 2020 and also since inception.
Afterpay vs Zip key takeaways
Afterpay is a bigger player with more market share, a European and Canadian audience and higher returns for investors. For consumers however, Zip offers more options and this could be a key difference over time. Zip also has no scheduled repayments (you determine them within the account), so this can be a competitive advantage over Afterpay.
Even though Afterpay seems to be a clear winner for investors, it still has a lot of competition in general. Also, in the BNPL sector, companies are something only 1 good partnership away from securing huge amounts of market share. As BNPL is such a hot sector this year, it could be worth considering hedging bets and securing shares in both.
