Afterpay is one of the biggest Buy Now Pay Later (BNPL) platforms in Australia. Since its launch in 2014, it has helped millions of Aussies make purchases without the hassle of paying upfront. But now it seems that this revolutionary payment plan will become something normal for consumers around the world.
There are many competitors in the BNPL space, including Zip, humm, Klarna and Splitit – with the race to reach the end gaining traction every day, there may be a new contender that will change everything.
Visa has announced the launch of its own BNPL platform, allowing consumers to make purchases with ‘instalment payment capabilities’ without having to enter a third-party app. Trials are now underway for retailers, who can offer the payment plan to consumers, rather than use apps such as Afterpay, Zip and Splitit. “Visa’s instalment capabilities are changing the game by allowing issuers to leverage an existing payment account consumers already have and are familiar with, instead of asking them to submit to a credit check, download an app or open another line of credit,” explained Sam Shrauger, Visa’s Senior Vice President, Global Head of Issuer and Consumer Solutions.
Following Visa’s statement, Zip’s share price dipped 11 per cent, and Afterpay’s followed suit with a ten per cent drop. Although Visa’s new venture may have sparked this drop in numbers, it’s not the only reason why shares are falling.
In the past twelve months, there has been extensive coverage on the legal and financial cracks that the BNPL platforms fall through. While the payment plans are an easy and simple way for consumers to make large purchases that they may not be able to justify at the time, it does fledge concern for those who are unable to pay back the remaining credit, thus creating a ‘crippling’ debt that some just can’t repay.
Afterpay found itself in hot water in June after disclosing that it was being investigated by AUSTRAC for ‘potential breaches’ of the Anti-Money Laundering and Counter-Terrorism Financial Act 2008 (AML/CTF regulations). According to the AUSTRAC website, the external auditor will examine Afterpay’s governance and oversight of decisions related to its AML/CTF framework, identification and verification of consumers, obligations and the development of its money laundering and terrorism risk assessment. “The audit will help identify if Afterpay has developed and implemented the systems and controls it needs to ensure it complies with its obligations. These laws are in place to protect businesses, the financial system and the Australian community from criminal threat,” explained AUSTRAC’s CEO, Nicole Rose PSM.
So, what about the others? Will they face the same fate as Afterpay? humm, owned by flexigroup, is said to be putting its standard with a ‘consumer-first’ approach. “humm is looking to disrupt current lending behaviour with an offering that is safe, responsible, puts consumers’ needs first, and can be trusted – in fact we have been trusted by Australians for decades,” explained Rebecca James, the Chief Executive of flexigroup.
It seems that BNPL platforms are here to stay, with Splitit signing off with Kogan as its first major local retailer. The NY-based platform entered the Aussie stock market exchange on Monday, with share prices rising from 20¢ in January to 62¢ on Monday morning. Splitit will be working with Kogan to provide a BNPL option for consumers, with the payment plan coming into fruition within a few days. “Kogan.com is one of Australia’s largest online businesses, with an active customer base of well over 1.5 million customers,” said the Splitit CEO, Gil Don. As the first Aussie retailer for the US BNPL platform it’s “signalling our growth in the Asia Pacific region,” explained Don.
Visa’s bid into the ever-growing BNPL sector is proof that Afterpay’s once revolutionary idea is now becoming a part of the mainstream in finance. These spin-offs of traditional payment plans have revolutionised the way consumers see finance and the way they budget their lives.
With Visa stepping into the BNPL ring, could this be the end of Afterpay? Probably not, as this could be seen as just a shake up to the sector. But it may start the prevention of future endeavours by smaller platforms that are trying to play against the big guys.
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