Afterpay shares tumble after Visa announcement

Shares in tech Darling Afterpay tumbled again in the wake of an announcement from global credit card giant Visa.

Afterpay’s Nick Molnar at Harvard in April.

Shares in “buy now, pay later” provider Afterpay have plummeted after payments giant Visa announced it too would allow consumers to pay for their goods in instalments.

The multinational heavyweight announced a pilot program in which customers can pay with instalments at the checkout, using their existing Visa cards.

It’s functionality remarkably similar to that offered by Afterpay, and investors reacted by sending shares in the Australian tech darling down 15 per cent in less than two hours on Friday.

Shares in Afterpay fell as low as $24.50, before closing on Friday at $25.07.

“Visa cardholders will have the option to divide their total purchase amount into smaller, equal payments over a defined time period on qualifying purchases, at the store and online or while travelling abroad,” Visa executive Sam Shrauger said in a statement.

“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.

“We expect instalments to become a foundational method of payment at checkout for both domestic and cross-border commerce payment transactions.”

Visa is the latest in a growing list of companies to take on Afterpay’s lucrative buy now, pay later business, with existing rivals including Zip, Openpay, Genoapay, Sezzle and Splitit all fighting for Millennials — and other customers — who prefer the convenience of splitting purchases into instalments.

US tech behemoth PayPal has also joined the fray, launching a ‘pay after delivery’ option that allows customers to pay for products through PayPal for 21 days after the purchase.

Visa’s announcement caps a torrid month for Afterpay, which earlier this week moved to reassure shareholders its co-founders did not intend to sell any further shares during fiscal year 2020.

In an update to the ASX, Afterpay also said it had set up a subcommittee and put forward three candidates to conduct an external audit in response to a probe by government financial intelligence agency Austrac.

“Afterpay is taking the audit very seriously,” the company said in a statement.

“The company reiterates that it welcomes the opportunity to continue to work closely and constructively with Austrac and will approach this formal process as an opportunity to ensure that our anti-money laundering and counter-terrorism financing compliance is robust.”

Earlier this month, Austrac said the scope of its audit would include the identification and verification process of customers, as well as its suspicious matter reporting obligations.

“The audit will help identify if Afterpay has developed and implemented the systems and controls it needs to ensure it complies with its obligations,” Austrac boss Nicole Rose said at the time