Australia's 'shop now, pay later' giant faces regulatory scrutiny - Nikkei Asian Review

SYDNEY -- Australia's Afterpay Touch Group, a market darling of 2019, has seen its stock price down 25% in the past week following speculation that its business model of buy now, pay later may come under more regulatory scrutiny.

The financial technology group has found international popularity through its interest-free installment platform, which has won favor mainly among younger generations. Its stock tripled from the start of the year, only to stumble as UBS issued a bearish assessment last week and Australia's central bank announced plans to review the industry in 2020.

Under CEO Anthony Eisen, the company has notched major growth for its Afterpay service, in which the customer pays just a quarter of the bill at the time of purchase. The rest is automatically withdrawn from the customer's bank account in three successive installments, two weeks apart. Missing a payment date incurs a penalty of 10 Australian dollars ($6.85).

The service requires only a debit card, making it appealing for millennials who, like 1990-born Afterpay co-founder Nick Molnar, came of age around the time of the 2008 global financial crisis. Members of that generation may be less likely to have credit cards.

Afterpay aims to make money not from late-payment penalties, but from usage fees paid by vendors that accept the service. While the company does not disclose its fee scale, it appears to be several percent of a customer's bill.

The installment-pay platform is finding a foothold in markets like the U.S. and U.K. And in the past year, its user base grew to about 5 million, with a total of 30,000-plus vendors, including virtual ones, accepting the service. It has been adopted at Australian budget carrier Jetstar Airways, department stores, dental clinics and elsewhere.

"In Australia, customers who began with us three or more years ago are now transacting more than 20 times per year," the company said in its earnings announcement for the full year ended June 30.

But hurdles remain. The company was ordered by Australia's anti-money-laundering body in June to hire an external auditor. Building up earnings capability while also maintaining trust among consumers, vendors and authorities alike may prove a challenge.

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https://asia.nikkei.com/Business/Banking-Finance/Australia-s-shop-now-pay-later-giant-faces-regulatory-scrutiny

2019-10-21 20:13:00Z
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