Installment, or alternative lending, has been on a major growth path for U.S. consumers and the recent stay-at-home lifestyle has given it a hockey stick trajectory. Several companies have benefited from this trend including Affirm, Klarna, and Splitit. Australian lender Afterpay has established a U.S. beachhead and its results have been eye-popping.
Alternative lending has become a crowded field and other e-commerce ecosystem players are getting into the act. Consumers will benefit with another payment option, and merchants also win by having multiple installment lenders to offer competitive fees and services.
The following Wall Street Journal article, excerpted below, reports more on the topic:
“Buy Now, Pay Later,” has been the recipe for success for Australian fintech company Afterpay. Investors plunking down for its stock now, however, might find themselves with buyer’s remorse later.
Afterpay’s Australia-listed stock has nearly doubled this year, despite a sharp selloff earlier in the year because of the coronavirus pandemic. Its shares have been on a tear recently—up 560% from their March lows. The company works with merchants to enable shoppers to pay for their purchases in installments—without fees or interest—over a few weeks. Afterpay makes money by charging merchants a fee while taking on the credit risks of the customers. Investors probably flocked into the stock as it is one of the few technology stocks listed in Australia.
Visits to Afterpay websites continued to grow in May, according to Citi, though that may slow this month as social-distancing measures ease. The world’s largest consumer market is clearly the dream arena for Afterpay, and it already had more active customers in the U.S. than in Australia and New Zealand as of March.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group
