Afterpay Touch faces rising competition in new markets

The ‘buy now pay later’ tech player has just passed the milestone of securing one million US customers and is now eyeing the UK.

Afterpay CEO Nick Molnar. The payments company is preparing to launch in the UK. Picture: David Geraghty.

Afterpay Touch Group chief Nick Molnar has lauded the payment company’s

milestone of securing one million US customers over 10 months, as he shrugged off concerns about heightened competition from banks and other payment firms.

US giant American Express has entered the buy-now-pay-later space with an instalments program that charges fees rather than interest, while banks are also mulling how they can better tackle the millennial demographic.

Afterpay — which charges retailers a percentage of the purchase price and competes in Australia with the likes of ASX-listed Zip and Flexigroup — also confronts new rivals in larger markets including US competitor Sezzle.

Mr Molnar isn’t phased by the challenge, though, saying Afterpay had a head start on many rivals and a defined market for smaller sized purchases.

“We just keep moving the opportunity further, it’s never felt bigger,” he said at the Altfi Australasia conference. Mr Molnar also noted that competition helped awareness of the model, and had helped to attract more US institutional investors to its register.

“Competition is a really good thing, it forces us to be better. It was what drove such fast retail adoption here, and in the US, because they are getting pitched by multiple providers.

“You are starting to see the banks play in this space and offer instalment products … at the end of the day the customer wins.”

In the US, as well as having one million “active customers”, Afterpay had 2,800 retail partners as at February 22. They include Kim Kardashian’s KKW Beauty and designer Rebecca Minkoff.

Afterpay’s half-year investor presentation cited data of to a $5 trillion US retail market, of which $620 billion was conducted online. In Australia the retail market stands at $320 billion, while in United Kingdom it totals $720 billion.

Afterpay is preparing to launch in the UK in the current half.

Afterpay’s interim results showed it had 3.5 million total active customers and more than 25,000 active merchants.

The company hasn’t, however, been short of detractors particularly after revelations last year that minors were using the platform to buy alcohol.

It also capped late fees from July 2018 after copping criticism from consumer groups about excessive charges.

Late fees as a percentage of underlying sales fell to 0.8 per cent in the six months ended December 31, from 1.2 per cent in the same period a year earlier.

Gross loss on loans as a percentage of sales fell to 1.2 per cent.