|
αlphaβeta 1
Attachment A: Afterpay submission to RBA
February 2019
|
αlphaβeta 2
Total purchases by category
‘Buy now pay later’ services have grown rapidly, but still represent less than 1% of total payments
Annual value of purchases – Fiscal years, $b
NOTES: 1. BNPL purchases only include purchases using Afterpay, Zip Pay and Openpay until 2017. The figure for 2018 also includes purchases using Certegy Ezi-Pay, Oxipay and
BrightePay. The 2019 figure includes all purchases in the BNPL market. 2. Information for cash transactions is not available, ATM withdrawals used as a proxy for cash expenditure
SOURCE: Afterpay data, Afterpay 2017 annual report, RBA, Zip 2017 annual report, ASIC Report 600: Review of buy now pay later arrangements (2018), AlphaBeta
analysis
285.1
271.2
298.0
310.2
24.0%
0.0%
22.5%
40.5%
43.9%
2014
18.2%
33.6%
43.9%
2015
0.0%
ATM withdrawals
2
2016
21.0%
35.2%
43.8%
614
0.8%
0.1%
36.8%
19.3%
43.8%
2017
0.6%
38.5%
42.7%
2018
17.0%
41.7%
32.1%
0.0%
BNPL purchases
1
Debit purchases
Credit purchases
2019
644
675
753
789
704
|
αlphaβeta 3
Players in the BNPL sector
The number of players in the BNPL sector has grown annually by 34%
Number of players, 2016 – 2019
SOURCE: ANZ BNPL Competitor analysis, Zip Annual Report (2016), Openpay Prospectus (2019), ASIC, Finder, AlphaBeta analysis
1
2
3
3
3
4
5
8
10
201420132012 2015 20172016 2018 2019 2020
CAGR 34%
New
entrants
by year
Although Afterpay,
Zip Money and
Openpay were the
key players in the
BNPL market until
2016, over three
years an additional
five players have
entered the market:
Humm, Brighte,
Laybuy, Splitit, and
LatitudePay, with two
players launching in
Australia in 2020
(Klarna and Sezzle)
Openpay Zip Money Afterpay Humm Brighte
LatitudePay,
Laybuy, Splitit
Klarna, Sezzle
|
αlphaβeta 4
Many merchants now offer multiple BNPL services
1
Merchants have a choice on which BNPL service to accept – the number of merchants offering
more than one BNPL has increased by 10ppts since 2018
% of BNPL-active merchants, 2018 – 2020
NOTES: 1. Information from Finder. 2018 estimate based on a sample of 2,000 merchants; 2020 estimate based on a sample of 22,000 merchants. These samples were used to calculate the share of merchants that offered only one BNPL service, and the share of merchants that offered more than one
BNPL service. 2. As at June 2018. Analysis based on merchants offering Afterpay, Zip Pay or Openpay. 3. As at January 2020. Analysis based on merchants offering Afterpay, Zip Pay or Openpay. 4. Publicly available information on the number of merchants offering Afterpay, Zip Pay or Openpay was
separately collected from provider websites or annual reports. To estimate the total number of unique merchants in the BNPL market, the following steps were taken: (1) the share of Afterpay merchants offering at least one other BNPL service was calculated. This was calculated for Zip Pay and OpenPay
as well (see footnote 1). (2) The share of Afterpay merchants offering only Afterpay was calculated. This was calculated for Zip Pay and Openpay as well (see footnote 1). (3) These shares are applied to the number of respective merchants at each BNPL service. The number of merchants only offering one
BNPL service were aggregated. This number does not account for the cohort of merchants that offer more than one BNPL service, due to data limitations.
SOURCE: Finder, Zip Annual Report, Openpay Prospectus, Afterpay, AlphaBeta analysis
3%
13%
2018
2
2020
3
10ppt
The number of merchants
offering more than one
BNPL has increased by
10ppts since 2018
~24 ~47
Number of
merchants
(‘000s)
4
|
αlphaβeta 5
The RBA has regulated payments services but not services with payments functionality such as
Uber Eats, eBay or Amazon
NOTES: 1. Includes payment services which are formally or informally regulated by the RBA. PayPal has updated its service agreement to align with RBA’s regulatory framework on
surcharging, permitting merchants to surcharge PayPal transactions as long as the surcharge does not exceed the amount the merchant is charged by PayPal for the transaction.
SOURCE: AlphaBeta analysis
Product attributes
Issuer of receipt
Merchant
(merchant name appears on transaction record)
Service
(Service name appears on transaction record)
Spending tracking
& budgeting
support
•
Tracks spending
through bank app
•
Tracks spending and
credit card balance
through bank app
•
Tracks historical
transactions
(e.g. sent and
received payments)
• Tracks spending and
future payments
•
Tracks historical
spending
•
Tracks historical
spending
•
Tracks historical
spending
Loyalty program
and/or
membership
benefits
•
Loyalty schemes
include ‘Visa offers’
and ‘MasterCard
priceless’
•
Loyalty schemes
include ‘Visa offers’
and ‘MasterCard
priceless’
• Membership benefits
including free same
day delivery, exclusive
savings and access to
daily deals
Delayed settlement
•
Revolving line of
credit
• Payment in four,
fortnightly
instalments
Consumer
marketplace
• App connects users
with 37,000
merchants
•
App connects users
with 25,000
restaurants
•
App connects users
with 40,000
merchants
•
App connects users
with over 10,000
merchants
Revenue generator
for merchants
• Increases purchases
and order value of
existing customers
• Increases customer
base
•
Increases purchases
and order value of
existing customers
•
Increases customer
base
•
Increases purchases
and order value of
existing customers
•
Increases customer
base
•
Increases purchases
and order value of
existing customers
•
Increases customer
base
Reduction in costs
for merchants
•
Lower fraud rates
•
Faster settlement
of transactions
• Lower marketing
costs
•
Lower operating costs
• Reduction in return
rates
• Lower fraud rates
• Lower marketing costs
•
Reduction in delivery
costs
• Lower marketing costs
•
Digital tools to build
online storefront
• Lower marketing costs
(e.g. Amazon Prime
Day)
•
Reduction in delivery
costs
Cash
Payment platform
RBA regulated payment services
1
Non-RBA regulated services with embedded payment functionality
Credit card
Visa/MasterCard
PayPal
1
Uber Eats eBay
amazon
Debit card
Visa/MasterCard
|
αlphaβeta 6
Merchant fee by customer acquisition channel
Afterpay’s merchant fees are low relative to providers of similar marketing services
% of transaction value (average)
NOTES: 1. Based on the midpoint of 10% (Clothing, Shoes & Accessories), and 12% (Music, Books).
SOURCE: eBay, Amazon, Afterpay
30%
10%
Afterpay
Facebook
Ebay
1
Google
Uber Eats
Unidays
4%
Amazon
10%
11%
13%
15%
• Average merchant fee. Platform that drives new customer acquisition, referral traffic and
payment processing
• Social media platform where merchants pay on a cost-per-click basis to generate new customer
acquisition
• Marketplace for merchants to sell products, enabling new customer acquisition and providing a
referral network
• Marketplace for merchants to sell products and services to a network of university students,
enabling new customer acquisition and providing a referral network
• Marketplace for merchants to sell products, enabling new customer acquisition and providing a
referral network
• Delivery provider and marketplace for restaurants, enabling new customer acquisition and
providing a referral network
• Search engine and marketing platform where merchants bid for premium position in search
results to generate new customer acquisition
As different services offer different features,
this affects comparison between channels
Key features of service
|
αlphaβeta 7
Sources of income
Unlike credit cards, Afterpay’s services are primarily supported by merchant rather than consumer
fees; less than 20% of Afterpay’s revenue comes from consumers versus 68% from credit cards
% of total income, FY 17-18 (unless noted)
NOTES: 1. Products listed for which data is publicly available. 2. Afterpay Annual Results FY19. 3. Openpay Prospectus 2019. 4. Senate Economics Committee ‘Interest Rates and
Informed Choice 2015’
SOURCE: Afterpay Annual Results (FY19), Openpay Prospectus 2019, ASIC
81%
68%
Certegy
19%
36%
Zip MoneyAfterpay
1
64%
52%
48%
Openpay
2
37%
63%
32%
Credit Cards in
Australia
3
Merchant fees
Customer fees
-49.7
Credit cards rely
primarily on interest
payments from
customers to generate
income
|
αlphaβeta 8
Afterpay does not lead to price increases on items; the items purchased most frequently on
Afterpay have seen their prices fall faster than the items purchased least-frequently on Afterpay
Price changes by their frequency of purchase on Afterpay
Average price per SKU by category, $, 2017 Q4 – 2019 Q4
SOURCE: Afterpay data, AlphaBeta analysis
• Note: SKU level price declines are
normal for fashion and accessories
• Prices on most-purchased products
in 2019 Q4 have decreased by 9%
since 2017 Q4
• As prices on least-purchase products
have not increased, higher profit
margins on APT sales may have led to
a reduction in prices on products that
are most-purchased today
51.5
49.8
2017 Q4 2019 Q4
-3.3%
54.2
49.4
2019 Q42017 Q4
-9.0%
Least purchased products on Afterpay
Most purchased products on Afterpay
Products in this category include swimwear,
babywear and casual wear
# of transactions: 84,436 # of transactions: 346,404
Products in this category include ladies bags,
make-up and jewellery
