Laybuy (ASX: LBY): Another ASX BNPL

After a solid debut on the Australian Securities Exchange (ASX) earlier this week, New Zealand buy now pay later company went on a volatile ride for its first week. Following the completion of an initial public offering (IPO) that raised A$80m at A$1.41/share with an indicative market capitalisation of A$246m under the code LBY, the Company commenced trading on Monday, the 7th of September 2020.

Key Highlights:

• Laybuy launched in New Zealand in 2017 and is a pre-eminent Buy Now, Pay Later (BNPL) service in that country. Laybuy also has a growing presence in the United Kingdom and Australia.

• The Company provides consumers with an innovative payment platform, bringing the traditional lay-by model into the 21st century. Consumers can shop now, receive their purchase straight away, and pay it off over six weekly interest-free payments.

• The IPO was met with strong demand from both institutional and retail investors, including a large number of institutions from Australia, New Zealand, Asia, North America and the  UK.

Until recently, Afterpay was seen outperforming on the ASX and was among the leaders of the BNPL companies. Without any doubt, the debut of Laybuy will be compared to the Afterpay and ZIP Co among others. With an interest-free instalment-based payment system, both Afterpay and Laybuy allow you to receive your purchase straight away, but Laybuy has more regular payments. Also, another key differentiation will be that the online Laybuy system runs an instant credit check to determine a client’s “Laybuy Limit”.

At this stage, Laybuy is not yet profitable and the founder is betting on the expansion in the UK to be the big growth engine for the business. As of writing, the company is currently trading at A$1.80 after reaching a high of A$2.18 earlier this week.

Source: Bloomberg

Paypal – A Threat?

A recent entrant in the BYPL sector, Paypal Holdings Inc has shaken other BNPL companies earlier this month following their announcement of “Pay in 4”, a short-term instalment offering for customers in the US.

The PayPal platform – used by over 80 percent of 100 leading U.S. retailers surveyed – enables merchants to drive conversion, revenue and customer loyalty without taking on additional risk or paying any additional fees, while enabling consumers to make a purchase and pay over four, interest-free instalments.

PayPal has remained at the forefront of the digital payment revolution for more than 20 years. By leveraging technology to make financial services and commerce more convenient, affordable, and secure, the PayPal platform is empowering more than 300 million consumer and merchant accounts in more than 200 markets to join and thrive in the global economy.

Major Buy Now Pay Later companies fell since the announcement and remained under selling pressure following the recent rout in the technology sector. In today’s challenging economic and retail environment, clients are seeking interest-free line of credits and Paypal will probably not be the last one tapping into the industry.

Source: Bloomberg

A strong entrant like Paypal may shake the BNPL competitors but those companies may still retain their competitive advantage. Afterpay remains a solid contender in the field while ZIP recent acquisition of Quadpay, a leading high growth Buy Now Pay Later (“BNPL”) player in the US may face direct competition with Paypal given the latter robust presence in the US. However, the co-founder Larry Diamond choose to see the bright side of Paypal move as increasing awareness of the instalment option:

“It is great validation that buy now, pay later is here to stay permanently as a true disrupter to the credit card,” he said. “It will become mainstream. As the overall pie increases, we are very well placed to capitalise on the increasing and rapid awareness.” (Source: Afr)