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August 23, 2021Blog Posts

For Buy Now, Pay Later, Investors Need to Shop for Best Deals | TSG talks with WSJ

The Wall Street Journal

Square bet the future of “buy now, pay later” on Afterpay, acquiring it for $29 billion. Investors should spread their chips around.

The deal unleashed a flurry of buying not just in online checkout carts but in the stock market. Shares of other so-called BNPL players, including Affirm Holdings and Zip Co., jumped after the deal despite the fact that their giant competitor teamed up with Square. The thinking appeared to be that Square’s willingness to pay a premium for one of their peers shows that fears about installment payments becoming commoditized are overblown, and that the market is overall poised for huge growth.

Even if it seems counterintuitive, there are definitely reasons to hop on the bandwagon. BNPL providers don’t all do exactly the same thing: Affirm, for example, also offers larger, longer-term point-of-sale loans for bigger purchases. Overall, BNPL likely represents less than 3% of e-commerce globally, and about half of BNPL users recently surveyed had used more than one service, according to payments research firm The Strawhecker Group. So there is likely room for volumes to continue to grow sharply. Plus, based on the multiple of forward sales for which Afterpay was acquired, even at a relative discount Affirm could still plausibly trade well over $70 per share, according to Autonomous Research analyst Rob Wildhack—several dollars above where it is now.

There might also be some attractive trades elsewhere. For one, PayPal Holdings has slipped this month. Yet PayPal also offers installments via its payment button and in some ways competes with Square to provide payment services to merchants. But PayPal’s installments work within its wallet already, so it doesn’t even necessarily require additional merchant buy-in to drive volumes still higher. If consumer awareness of BNPL grows broadly, PayPal would very likely be a beneficiary.

File:Afterpay-logo.svg - Wikimedia Commons

Source

New research from The Strawhecker Group analyzes key trends and consumer attitudes.

Download a free infographic covering several findings from the full report.

Consumers have increasingly adopted Buy Now, Pay Later (BNPL) services for multiple reasons; a desire for financial flexibility, a way to avoid incurring credit card debt, or to purchase items outside of their budgets. However, despite its popularity, consumer debt and missed payments have led to calls for additional research and regulation. Read the press release.

To take a closer look, The Strawhecker Group (TSG) conducted a survey of over 1,500 U.S. consumers in early 2021 with the goal of understanding domestic attitudes and perspectives on the use of BNPL services. The complete findings, a selection of BNPL provider profiles, and market landscape details can be found in the firm’s new report Buy Now, Pay Later: An Analysis of Key Trends and Consumer Attitudes.

Highlights of this extensive 81-page report include:

  • Buy Now, Pay Later Background
  • Key Players in the Buy Now, Pay Later Space
  • Buy Now, Pay Later Consumer Survey
  • Concluding Thoughts: The Future of Buy Now, Pay Later
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