It has not been smooth sailing for the high flying buy now, pay later (BNPL) segment in 2021. Valuations were slashed and stock prices came crashing down in the February bond market sell-off. Despite a partial recovery earlier this month, the BNPL stocks have lagged in performance. This week, again, the performance has lagged and we have witnessed minor corrections across all the BNPL stocks.
Ecommerce is booming and the technology that is being leveraged in this sector has made it easy to shop right from the comfort of the buyer’s home. As the younger generation starts to buy more, the BNPL segment that offers customers a flexible, interest-free financing option has gained popularity. The growth of BNPL and online shipping have complemented each other extremely well, and their integration is fuelling the growth potential that is on offer.
Australia is the home ground for the BNPL sector. Several companies originated here and are now landing on the shores of North America and Southeast Asia – markets that come with high consumer spending and huge population densities.
Headquartered in Sydney, Zip Co. is one of the largest BNPL players in Australia. Zip has operations across Australia, New Zealand, South Africa, the United Kingdom, and the USA. With Zip’s acquisition of QuadPay, the firm has entered the highly lucrative North American market. In the firm’s latest quarterly report, Zip US (Quadpay) was again a standout, delivering significant growth in what is typically a seasonally quieter trading period, achieving record results across all core metrics –$762.0m in transaction volume (up 234% YoY), $54.4m in revenue (up 188% YoY) with 674k new customers joining the platform (up 153% YoY to 3.8m customers). The group had a fantastic quarter with revenue up 80%, transaction volume up 114%, and customer numbers going up by 88% to 6.4 million.
Zip shares trade at $8.12 after significant declines this week.
Sezzle is headquartered in Minneapolis, USA. Being a relatively young company among the BNPL players in Australia, they are growing at a rapid rate. Their Underlying Merchant Sales (UMS) is expected to reach an annualized pace of US$2.5 billion (A$3.2B1) by the end of 2021. Strong positive trends continued in January 2021 with Active Consumers Reaching 2.4M(up 5.7% MoM), Active Merchants rising to29.2K(9.5% MoM), and UMS of US$117.8M, representing a record month and 65.1% above the average monthly pace for 2020. With all their key operating metrics rising, Sezzle has been performing exceptionally well. At market close, Sezzle shares closed at $8.60 a share.
Humm is one of the smallest BNPL companies on the ASX with a market cap of just over $450 million. They facilitate purchases for over 2.6 million customers. Humm entered the health market two years ago and has rapidly grown to be the largest BNPL provider in this space, delivering over $120m on an annualized basis. One in four dental chairs in Australia is now covered by humm. This is being driven by an exclusive partnership with Centaur’s Dental4Windows software, which has integrated the National Dental Plan into its leading quoting software and presents humm as the exclusive finance solution in over ten thousand treatment plans being offered every year. Humm’s ability to finance larger transactions up to $30,000 over terms ranging from five fortnights to five years makes it a clear industry leader in this sector. The average transaction size of over $4,000 demonstrates that humm is attracting customers that other BNPLproviders are not able to service. Humm shares closed at $0.93 a share at market close today.
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