Join our daily newsletter At The Bell to receive exclusive market insights
- US payments giant PayPal joins the buy now, pay later (BNPL) market in Australia, offering payment instalments while doing away with late fees
- The “Pay in 4” service has already been rolled out in the US, Britain and France, but it seems the lack of late fees is unique to Australia
- Paypal says research found that late fees were a major deterrent for Australian consumers who were hesitant to use BNPL services
- At the same time, Apple has announced plans to launch its own BNPL service alongside banking partner Goldman Sachs
- The news has sent the ASX BNPL sector tumbling, with the likes of Afterpay, Zip and Sezzle each trading almost 10 per cent lower
US payments giant PayPal has joined the buy now, pay later (BNPL) fray in Australia, offering payment instalments while doing away with late fees.
The PayPal “Pay in 4” service has already been rolled out in the US, Britain, and France but launched in Australia today to take market leader Afterpay (APT) on in its home turf.
Afterpay shares shed almost a 10th of their value in early trading action following the Pay in 4 launch.
More than just a fresh competitor in the BNPL space from an established fintech giant, PayPal’s service changes the core model of the sector by being the first payment instalment option to completely eliminate late fees
PayPal Consumer Insights Expert Tommy Suffren said Australians could now access a huge range of goods from “millions of businesses” and pay for them in interest-free instalments.
“We’ve seen a clear demand from consumers for an easy, secure BNPL service in Australia with no late fees and we’re responding to that demand,” Mr Suffren said.
“We’re providing Australians with the peace of mind of knowing they can use a buy now, pay later service on PayPal’s secure platform and will be covered by our Buyer Protection policy for eligible purchases, without the risk of being penalised for late payments.”
The Pay in 4 feature is available as a payment option on any typical purchase made through PayPal.
Late fees earned Afterpay almost $70 million over the 2020 financial year alone.
Australian specialty
The lack of late fees seems to be a feature unique to only the Australian market at this stage.
Both the US and French versions of PayPal’s website confirm that late fees are payable for missed Pay in 4 payments.
It seems therefore that the removal of late fees for Australian consumers comes amid a general hesitancy among Australians to use BNPL services to pay for their goods.
PayPal said research found that while almost all Australian online shoppers were aware of BNPL, more than half of them — 55 per cent, to be exact — had never used it.
Late fees were cited as a key reason for this, with 50 per cent of Australian shoppers saying they would not use a BNPL service with high late fees.
It should be noted that the research, commissioned by PayPal, surveyed 1008 Australian consumers over 18 who shop online and use a smartphone.
Compounding sector blows
As if a late-payment-free offering was not tough enough for the existing Australian BNPL sector to deal with, Apple and Goldman Sachs have this week also announced their own plans for a payment instalment service.
Bloomberg reported that Goldman Sachs, which has been an existing Apple partner for the Apple Card credit card since 2019, will act as the lender for BNPL loans.
This will let users pay for any Apple Pay purchases in instalments.
According to Bloomberg, users will be given the option to either make four interest-free payments every two weeks, as is typical for the BNPL space, or to sign up for longer payment plans spanning over several months but with interest.
News of the planned Apple service, along with the Pay in 4 Australian launch, has sent major players on the ASX BNPL sector tumbling today.
At 1:31 pm AEST, shares in Afterpay were down 9.54 per cent at $107.06 each; shares in Zip Co were down 9.81 per cent to $7.45 each; and shares in Sezzle were down 9.47 per cent to $8.03.
