Former Head at Affirm Holdings Inc
- Buy now, pay later providers' operating environment – potential growth rates in a normalised economy
- Afterpay (ASX: APT), PayPal (NASDAQ: PYPL), Klarna, Sezzle (ASX: SZL) and others – competitive positioning across key customer selection criteria
- Merchant discount rate compression potential
- Evolution of partnership strategies
- Outlook for 2021 and beyond including potential consolidation
Can you give an overview of the operating environment for BNPL [buy now, pay later] providers, highlighting any trends or drivers that we should pay attention to?
You mentioned BNPL being around 2% of e-commerce payments. What penetration or growth rate do you expect over the next five years? Can you outline any off-sets or areas where you would expect outsized growth?
Can you describe the regulatory environment for BNPL companies in the US and other major markets? What would be a potential best-case and worst-case scenario?
What would be a worst-case regulatory scenario? What developments from the CFPB [Consumer Financial Protection Bureau] or other regulatory bodies would give you cause for concern?
Can you outline the BNPL competitive landscape, highlighting the main players? How would you describe their relative positioning by product or go-to-market? Who are the potential winners and losers?
Why did you exclude PayPal from the major players, given some might assume this is the company’s market for the taking? It has a competitive offering with zero incremental cost and a two-sided network with extensive customer and merchant relationships. How do you assess its prospects with its Pay in 4 product?
Do you expect PayPal to become more competitive or might it continue to lag players such as Afterpay and Klarna?
Would you say players across the competitive landscape are in a land-grab phase of development? If so, how might that affect profit margins in the short and long term?
To what extent do you think margins will shift as the market matures?
You mentioned there would probably be a rationalisation of the competitive landscape. How many players do you think will ultimately remain after the land grab concludes? Of those that fall out or get acquired, who do you expect to shake up?
Do you expect more traditional players to enter the market? There has been Discover and Ally plus Sezzle, as well as Amex, Pay it Plan it and probably others. How would that impact the competitive dynamics and the outlook for take rates?
How do the aggregators or digital wallets fit in the market? How do they impact the competitive dynamics?
Can you give an overview of existing and potential partnerships, especially between e-commerce firms and online payment gateways? How important is that for SMB uptake?
Afterpay and a few others are also now launching incentive programmes. Could this cost become material as industry players seek to attract user bases?
How do you expect merchant discount rates to trend? Are they likely to shift over the next five years, given the competition?
To what extent does having a stronger customer relationship give players such as Afterpay or Klarna an advantage over Affirm or other players? Does Shopify owning BNPL branding help it less than a branded product would?
What do you think is commonly misunderstood by the investment community around BNPL? What are some of the limiting factors of the BNPL model?
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