ASIC set to shine spotlight on buy now, pay later
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Street Talk understands ASIC is preparing a deep dive into the niche consumer finance sector, including the buy now pay later operators like Afterpay. Erin Jonasson
Everyone loves a six-bagger. Even the corporate cop.
Buy now, pay later company Afterpay - now Afterpay Touch Group - has had an eye-catching run since commencing operations in early 2015.
It listed at $1 a share as a $165 million company in May last year, merged with fellow payments junior Touchcorp in June this year and is now worth almost $6 a share or $940 million.
The underlying business' growth supports the hype. The number of merchants offering its services was up 45 per cent in the three months to September 30, while Afterpay merchant fees were up 36 per cent.
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Few other businesses can boast such quarter-on-quarter growth. And analysts reckon Afterpay has plenty of opportunities up its sleeve with new sectors such as travel and new geographies.
But with success comes attention. And it is understood that attention goes all the way to the Australian Securities and Investments Commission.
Street Talk understands ASIC is preparing a deep dive into the niche consumer finance sector, including the buy now pay later operators like Afterpay, another listed player, Zipmoney, and Flexigroup's Oxipay and a host of others operating privately.
Source said the regulator wants to find out more about how these companies make money, their level of disclosure to customers, credit approval processes and is particularly interested in things like late payment fees and other areas where customers may get stung.
It's understood the big sector review is scheduled to kick off in the first half of next year, with the aim of determining whether the industry needs further regulation, whether customers are well informed about the products, and whether industry players should need to be licensed.
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Sources said it would be a fairly typical sort of review for a fast-growing new industry, rather than aimed at prosecuting any one player or practice.
An ASIC spokesman declined to comment.
Small cap investors are no strangers to these types of reviews. Earlier this year,
the spotlight was on car dealers and the way insurance add-ons and financing were sold. There was also a look into the payday lending sector a couple of years ago.
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