Why is the Afterpay (APT) share price under pressure today?
Shares in BNPL provider Afterpay have risen 71% over the last 12 months.
Shares in buy now pay later leader Afterpay (ASX: APT) are normally among the top traded shares on the ASX, but on Thursday, the stock also happens to be among the top losers. At the time of writing, Afterpay was down nearly 3%, while smaller rivals Zip Co Ltd (ASX: Z1P) and Sezzle (ASX: SZL) were also in the red.
What is weighing on the Afterpay stock price?
The buy now pay later (BNPL) sector has been hit by some negative news overnight, and Afterpay is feeling most of the impact.
The main trigger seems to be the announcement by US payments giant PayPal (NASDAQ: PYPL) that it would acquire Japanese buy now pay later firm Paidy in a US$2.7 billion deal, taking a major step to claiming the top spot in the fledgling industry.
This is similar to the US$29 billion deal under which US digital payments company Square (NYSE: SQ) will take over Afterpay itself, and further sets into motion the consolidation in the sector that analysts have long warned about.
PayPal recently launched its BNPL service in Australia, after earlier rolling out the service in the US, Britain and France. Now, acquiring Paidy will allow the company to expand in the world's third-biggest BNPL ecommerce market.
Rising competition
Analysts are certain the Japan deal will give PayPal meaningful market share in a country where online shopping volume has more than tripled over the last 10 years to around US$200 billion. It will also give the company cross-selling opportunities while also building out its merchant network.
Incidentally, it follows news in recent days that Facebook is launching its Facebook Pay service in Australia, Afterpay's home market, which will allow users of the social media giant to add a bank card and make payments through Instagram and other Facebook apps.
Another behemoth Amazon, the largest ecommerce company in the world also recently announced a tie-up with US-based BNPL provider Affirm to introduce instalment payments to its customers.
The growing competition from global players is sure to unsettle Afterpay investors, because it is quite likely to be reflected in near term margins and could also lead to an increase in marketing costs.
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