Halversonsays the US ecommerce market is unique because of the power of Amazon.Pre-COVID it controlled about 49 per cent of the market but Halverson says mostanalysts now believe Amazon has a 58 to 60 per cent share.

Amazondoes not accept buy now, pay later in the United States and if it did decide todo so, it would create its own payment solution, according to Halverson.

He saysthe biggest concern he has about buy now, pay later is the likely spike in baddebts because of the pandemic-induced recession. These will probably comethrough early next year.

Perhaps this article in AFR yesterday had an impact on all bnpl's


https://www.copyright link/chanticleer/a-different-spin-on-afterpay-s-success-20200731-p55haz

A different spin on Afterpay's success

It was only when a report onglobal payments company PayPal hit Chanticleer's inbox that it became clear thelocal market might well have overhyped the achievements of buy now, pay laterdarling Afterpay

Thereport, by Morgan Stanley analyst James E. Faucette, included a table showing40 different payment companies operating in the United States and theirpercentage share of the top 477 merchants in the US, with total sales of $US454billion ($626 billion).

Nick Molnar and Anthony Eisendeserve praise for their entrepreneurship but don't forget the bigpicture. David Rowe

Afterpaycame in at No. 23, with a 5 per cent share of merchants. This can be read twoways. Those bullish on Afterpay will say this shows the enormous opportunity for growth in the US. The bears will say Afterpay's US success should not be seen in isolation from the performance of Affirm, a buy now, pay later company established in 2012 that also appears in the Morgan Stanley table. After eight years of plugging away in the US, Affirm sits at No.12 on the table with an 11 per cent share of the top merchants.

Yourrooster has plenty of admiration for the entrepreneurs building global paymentbusinesses such as Nick Molnar and Anthony Eisen at Afterpay. But that shouldnot stand in the way of putting Afterpay's numbers in the context of the bigglobal picture.

GrantHalverson, a payments consultant who mainly works for clients offshore, says itis not well known in Australia that the entire buy now, pay later sector in theUS accounts for less than 1 basis point of total money processed throughpayment companies there.

He says the amount purchased oncredit cards in the US in 2018 was $US3.98 trillion, and the amount purchasedon debit cards was $US2.75 trillion. Compare that to Afterpay's US sales of$US2.7 billion.

Halversonsays the competitive dynamic in the US is very different to Australia wherepeople are shedding credit cards rapidly. A total of 5 million credit cardaccounts were closed between 2016 and 2020. In the US, 45 million new cardswere issued over the past year.

It's all about context

Halversonsays the latest figures published by Afterpay showing strong growth in new customers should be seen in the context of what has happened to other payment companies during the COVID-19 pandemic.

"Ithink the recent Afterpay results are very disappointing when you consider themassive once-in-a-lifetime free kick ecommerce has been given due to lockdownsin every market they operate in," Halverson says.

"Afterpayhas not kept pace with the massive online explosion, and its Australian and NewZealand business is still 60 per cent of all revenue."

Halversonsays in the six months to June, Afterpay lifted its customer base by 200,000.PayPal added 1.3 million new customers in the first three months of the year,taking its total customer base in Australia to 8.4 million.

PayPalcame out of the Morgan Stanley table as a star. It is accepted by 79 per centof the top merchants in the US and has one of the lowest churn rates of anypayment option. It added 20 million new users in the three months to the end ofMarch.

Afterpayhas 3.3 million "active" consumers in Australia and New Zealand.Halverson says Afterpay added only7300 merchants in the first half, its slowestgrowth rate ever.

Has it peaked?

Hewonders if buy now, pay later has peaked in this part of the world given thecombined Australian and New Zealand population is 30 million with about 12.3million classed as Millennials and Gen Z.

"So3.3 million is 27 per cent of the total, which is hardly great after sixyears," he says. "Even worse, $6.6 billion sales in Australia and NewZealand is only 38 basis points of ANZ electronic transactions."

Halversonsays Afterpay's recent UK numbers are simply awful.

"Theylaunched in the UK before the USA and they have sales of $600 million from 1million consumers with a very low $330 annual spend in a boom market," hesays.

"Sure,they added 700,000 merchants – but the UK economy is in a very, very deep holerunning at 75 per cent of pre-COVID levels."

Halversonsays Afterpay's US sales of $US2.7 billion is 3 basis points of the old onlinefigure as at March 30 – but 1.6 basis points of the expected new COVID-19online market, which is running at more than $US125 billion per month.

He saysAfterpay is not keeping pace with Klarna, which added 14 million customers in the first half of this year and now has 98 million global consumers.

Klarnalaunched in the US at a similar time to Afterpay but its consumer base is nowabout 50 per cent higher than Afterpay's.