Afterpay paves way for EU expansion, PayPal to take on Aussie BNPL market

Afterpay paves way for EU expansion, PayPal to take on Aussie BNPL market

Afterpay co-CEOs Anthony Eisen (left) and Nick Molnar (right) hope Europeans will flock to their BNPL solution. (Photo provided).

Australian buy-now pay-later (BNPL) service Afterpay (ASX: APT) has put the wheels in motion for its European expansion with the completion of its latest acquisition today.

Meanwhile, APT's shares are rising despite a threat posed by tech giant PayPal after the US-based company announced its plans to enter the BNPL space globally, including in Australia.

Afterpay's push into Europe will be supported by the 50 million-euro (AUD$77 million) acquisition of BNPL player Pagantis, completed today.

The Australian BNPL giant sees Europe as the company's next frontier, having already made a significant dent in the US market, and after building momentum in the UK.

With an addressable market of $494 billion, Afterpay hopes Europe's large millennial population, vast fashion and beauty retail markets and significant debit card usage will play in the company's favour.

Pagantis currently provides a range of BNPL and traditional credit services across Spain, France and Italy with regulatory approval to also operate in Portugal.

The acquisition will also accelerate and de-risk the roll-out of APT's UK subsidiary Clearpay across the European market.

With the acquisition now complete, APT will be re-configuring existing technology to fit with Afterpay's core product, and Pagantis will be rebranded to Clearpay, enabling an expedited launch into the four markets it can operate in.

In August 2020 co-CEO Anthony Eisen said the company's success to-date with international expansion gives Afterpay confidence to tackle the European market.

"Entering into such internationally relevant markets like the US and the UK and seeing our growth outpace what we experienced in our more mature Australian market, validates the appeal of our product on a global scale," Eisen said.

"Acquiring Pagantis provides us with the necessary regulatory licencing, resourcing and infrastructure to expedite the launch of Afterpay into key countries in Southern Europe and beyond.

"The new markets we will be entering will provide our global retailers with the opportunity to offer Afterpay in more regions and for us to provide a whole new customer base with access to our differentiated and customer centric model."

PayPal announces BNPL solution

Meanwhile, US-based tech giant PayPal has announced it will be launching its own BNPL platform later this year, taking on established players like Zip (ASX: Z1P), Afterpay, and Humm (ASX: HUM) in Australia.

The US-based company, which has more than 9 million active accounts in Australia, will roll out the BNPL solution called PayPal Pay in 4 to Aussie customers in early June 2021.

The product will be seamlessly integrated into the group's simple and ubiquitous payments platform, adding Pay in 4 as a payment option in customer wallets and available for use wherever PayPal is accepted.

If selected, users will get access to an interest-free BNPL solution at no additional cost to PayPal customers.

PayPal business customers can also add PayPal Pay in 4 messaging to their site, so consumers are aware of their payment options with the new service.

For consumers, Pay in 4 allows them to split eligible purchases from $50 to $1,500 over four equal, interest-free instalments, with automatic re-payments drawn every two weeks. No fees are charged when payments are made on time.

"Australian consumers are looking for more choice and flexibility and PayPal Pay in 4 gives them yet another way to purchase securely using PayPal," PayPal Australia general manager of payments Andrew Toon said.

"Our Australian business customers have been requesting buy now pay later functionality from us, and we're excited that we can offer PayPal Pay in 4 to them at no additional cost.

"Shopping habits are changing at an unprecedented rate and during the pandemic we saw more than two million Australians start shopping online for the first time. We will continue to support Australian businesses of all sizes to adapt to rapidly changing consumer behaviours by evolving our service to meet their needs."

Despite the threat, BNPL stocks are rising today, with Afterpay up 9.46 per cent, Zip Co up 0.80, and Humm Group up 0.21 per cent.

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