‘Buy now, pain later?’

This asset manager says risks in market darling Afterpay seem heavily skewed towards the downside.

2/6/20: Nick Molnar, CEO of Afterpay at Bondi Beach. John Feder/The Australian.

Hello and welcome to The Download, The Australian’s technology blog for the latest tech news.

David Swan 3:20pm: ’Buy now, pain later?’

One asset manager says that while there‘s potential upside from a long-term investment in Afterpay, the risks seem heavily skewed towards the downside.

Portfolio manager Simon Mawhinney from asset manager Allan Gray Australia conducted an analysis of Afterpay, whose share price has risen almost ten-fold in two years, before this week‘s ASIC report into the buy now, pay later industry.

Mr Mawhinney said that at around $100 per share, Afterpay has a market capitalisation of about $30 bilion, and is set to mature further as a business in coming years.

“Once Afterpay’s extraordinary growth has plateaued, a mature Afterpay should be as cyclical as any other short-term money lender. Its fortunes will rise and fall with the economic cycle which sees retail spending and bad and doubtful debts fluctuate,” Mr Mawhinney said.

“One does not have to look much further than the world’s banking sector to realise companies like these trade at much lower than 10 times ‘normal’ pre-tax profits. You could argue a mature Afterpay should not trade at a multiple this high. Its loan book is completely unsecured, it doesn’t run credit checks on its users, and its business could contract rapidly during economic downturns.”

The asset manager added that if today’s price is reasonable, a mature Afterpay will need to earn $3 billion in pre-tax profits. In order to do this, a calculation of merchant sales would need to be in the region of $264 billion per annum.

“This is a little over 20 times 2020’s merchant sales and considering their 112 per cent growth in 2020 alone, this would be achieved in four and a half years,” he said. ”If this happens, it is likely Afterpay’s $264 billion share in merchant sales would put its share well above Mastercard’s and possibly even towards or greater than Visa’s. This seems like a very tall order, but it is certainly possible.”

“Undoubtedly there are opportunities for Afterpay. Its proponents might reasonably argue that the above does not factor in any Afterpay success in Asia or South America.“

Chris Griffith 12:10pm: Google rolls out Map COVID updates

Google has launched a project to include more COVID-related material in its Maps app on Android and iOS. It’s part of a series of updates to Maps announced today.

The COVID layer of Maps will start to include all-time detected cases in an area, with links to COVID resources from local authorities. Google says it is increasingly including details of crowded locations, transport and venues taken from analysing real time data to help people with social distancing. It can also offer information about the busiest times.

In NSW it will include identified hot spot areas on maps as well, as this information is available from the state government.

More details

Chris Griffith 11.45am: Zoomo offers weekly take home rental e-bikes for commuters

Commuters wishing to try an electric bike without buying one can now rent an e-bike from an Australian start-up. They won’t need to depend on grabbing a share bike from the street. Australian micromobility start-up Zoomo today says its e-bikes will be available from $29 per week. You can take them home as you would a bike you own.

Zoomo says you get roadside assistance and insurance cover and the bikes come with electric locks, GPS tracking, fast-charging batteries, and built-in alarms.

Zoomo electric rental bikes are available in Sydney, Brisbane and Melbourne.

“As Australians become increasingly critical of their own environmental impact, e-bikes are becoming a prevalent alternative to cars and public transport,” says Zoomo. “In fact, e-bikes only emit 22g of CO2 per km, which is less than one-tenth of a car’s worth of CO2 per km (271g).”

“After building the bikes that couriers trust for many years, we are excited to offer the same level of reliability, accessibility and affordability to everyday Australians,” says Mina Nada, CEO and co-founder of Zoomo. “Our new consumer subscription makes it easier than ever for Aussies to travel to work or to the local cafe safely without breaking the bank — or a sweat — as we head into summer, the ideal months for cycling.”

The rental bikes are available in Zoomo’s Sydney, Brisbane and Melbourne stores and online via home delivery.

Zoomo says that in Sydney it is partnering with office landlord, Dexus to trial a COVID-safe commute option for people working from Australia Square, Gateway and One Margaret Street in Sydney.

David Swan 10.45am: Big potential for new fintech partnership

New tech-enabled banking features including single-click swapping of services providers and a detailed breakdown of monthly spend could be in consumers hands within weeks, thanks to a new fintech partnership.

Fintech Adatree’s tie-up with We Discover, a digital innovation agency that has supported Qantas, Vodafone and Zip Co, is aimed at giving companies a running start at launching new services with this newly accessible consumer financial data, according to We Discover boss Scott Forrester.

While the policy underpinning Open Banking, the Consumer Data Right (CDR) launched on July 1, the ability for companies to allow their customers to opt into sharing their financial data regarding loans, mortgages and payments only launched on November 1.

Adatree, a start-up founded by former Tyro and Volt executives, has been a technical partner to one of the 10 companies chosen to be Data Recipients in Australia and as a result, has a tested platform ready to launch to market.

The pair have created the first visualisations of what new Open Banking powered services could look like and say they could launch as early as December.

They expect comparison websites such as Canstar, iSelect and Finder could be the first in line to leverage the new technology.

The new services are the culmination of service over two years of debate and policy work from the government, the major banks and the fintech industry, Mr Forrester said.

While innovation will start with the finance industry, the government expects the CDR and Open Banking technology will over time enhance competition and choice in the energy and telecommunications sectors as well.

“Within months we’ll see financial processes that used to take consumers days give way to new innovative solutions that require a single click,” We Discover CEO and co-founder Scott Forrester said.

“This partnership with Adatree is a fundamental step towards exploring and rolling out these new services. This won’t all be in-house innovation from our major financial institutions. They will need to partner and work with disrupters to achieve the speed to market they need to keep up with the pace of change.”

David Swan 10.20am: Apple’s ‘calculated’ move

Epic Games founder and chief executive Tim Sweeney has hit out at Apple’s decision to cut its app store fees for small businesses, describing it as a calculated move designed to ‘remove critics’.

Fortnite maker Epic Games announced on Wednesday it was bringing its landmark legal battle against Apple to Australia, taking on the tech giant in the Federal Court over its 30 per cent app store fee and alleging Apple has breached both Australian Consumer Law and the Competition and Consumer Act.

“This would be something to celebrate were it not a calculated move by Apple to divide app creators and preserve their monopoly on stores and payments, again breaking the promise of treating all developers equally,” Mr Sweeney said in a statement to The Australian.

Epic founder Tim Sweeney. Source: Supplied.

“By giving special 15 per cent terms to select robber barons like Amazon, and now also to small indies, Apple is hoping to remove enough critics that they can get away with their blockade on competition and 30 per cent tax on most in-app purchases. But consumers will still pay inflated prices marked up by the Apple tax.

“iOS and Android need to be fully open to competition in stores and payments, with a genuinely level playing field among platform companies, app creators, and service providers. That, and not gerrymandering the community with a patchwork of special deals, is the only path to a fair app marketplace.”

Apple said in a statement that its App Store has helped fund over 28 million developers over 12 years grow their businesses.

“Small businesses are the backbone of our global economy and the beating heart of innovation and opportunity in communities around the world. We’re launching this program to help small business owners write the next chapter of creativity and prosperity on the App Store, and to build the kind of quality apps our customers love,” Apple CEO Tim Cook said in a statement.

“The App Store has been an engine of economic growth like none other, creating millions of new jobs and a pathway to entrepreneurship accessible to anyone with a great idea. Our new program carries that progress forward — helping developers fund their small businesses, take risks on new ideas, expand their teams, and continue to make apps that enrich people’s lives.”