The chief executives of Australian buy now, pay later (BNPL) companies have batted away concerns over payments giant PayPal's entry into the sector, saying the market is big enough to accommodate multiple players.
Shares in Australian BNPL operators plummeted on Tuesday and continued to fall on Wednesday, with high flyers such as Afterpay down 10.8 per cent and Zip falling 20.8 per cent over the two days.
Zip co-founder Larry Diamond said he was not concerned about payment "elephant" PayPal.Credit: Peter Braig
Investors were reacting to a new offering from the $245 billion payment giant PayPal, which will allow users to pay for items in four instalments, dubbed 'Pay in 4'. The service will cost merchants and consumers less than what they pay to existing BNPL players and will be available to the company's 190 million US users.
Analysts have flagged concerns that operators reliant on US expansion such as Afterpay and Zip, which recently completed a $400 million acquisition of US BNPL company Quadpay, could be dwarfed by PayPal's size and market dominance.
"The faster BNPL grows and succeeds it will inevitably attract new competition and/or regulation, that will either reduce the economics currently enjoyed by participants, or limits their long term growth potential," UBS analyst Tom Beadle said.
However, Zip chief executive Larry Diamond is confident the company can outmanoeuvre the "payment elephant" PayPal.
"[Zip's] insatiable appetite for what's better for users, our deep and ongoing investment in innovation and ability to move quickly - that has and will always separate us from the global payment elephants," he said.
"[BNPL] will become mainstream. As the overall pie increases, we are very well placed to capitalise on the increasing and rapid awareness," he said.
Meanwhile, Afterpay boss Anthony Eisen said the two platforms were sufficiently differentiated, saying PayPal's product was "merely offering a transaction solution" compared to Afterpay's dedicated platform.
Afterpay CEO Anthony Eisen. Credit: Elke Meitzel
"Competition from traditional and newer players has been present throughout our journey - we expect this to continue but it will not change our strategy or diminish our global opportunity," he said.
Similarly, US-based but ASX-listed BNPL operator Sezzle also said there was plenty of room in the market for numerous operators. Sezzle shares are down 20 per cent since Tuesday morning.
"We have always expected further competition in the BNPL space and we are more than prepared for it," chief executive Charlie Youakim said.
PayPal's launch was even less of a concern for operators Splitit and Humm (formerly Flexigroup). Both run services that fall outside the remit of PayPal's new offering.
Flexigroup chief executive Rebecca James.Credit: Graham Jepson
"We think it will have no impact, if anything it will help," Brad Paterson, Splitit chief executive said. "We are the only provider of instalments on credit cards in the BNPL space, and we see PayPal as complementary to the solution we provide."
Meanwhile, Humm chief executive Rebecca James said her service, which focuses on big-ticket items with values of over $1000, would not be impacted by PayPal's service which has a limit of $600.
"It's unlikely to have any meaningful impact on our business," she said.
Nevertheless, shares in Splitit fell have fallen 13.9 per cent since Tuesday, and Humm shares are down 6.5 per cent.