Afterpay Touch Group Ltd (ASX: APT) CEO Anthony Eisen is in the media telling investors he’s not worried by Commonwealth Bank of Australia’s (ASX: CBA) expansion into the buy now, pay later industry.
Afterpay Touch is the owner of the popular “buy now, pay later” app. As of mid 2019, Afterpay had over 4.3 million registered users worldwide, making it one of Australia’s true technology success stories.
Afterpay’s Defence
As part of Commonwealth Bank’s release of its FY19 result, it announced a major investment into European buy now, pay later operator Klarna.
The major bank announced that as part of its strategy to lead in retail and commercial banking, it had signed an agreement with Klarna, which is a global payments provider with more than 60 million customers and 130,000 merchants. Klarna generated revenue of US$627 million in 2018.
CBA invested US$100 million in parent Klarna Holding AB as part of its US$460 million capital raising. CBA will become Klarna’s exclusive partner in Australia and New Zealand and intends to further invest at the parent and local level to support the partnership.
As you can imagine, this could have a significant effect on Afterpay if Klarna were to become a sizeable player in the local BNPL market.
The Australian Financial Review reported that CBA CEO said one of its intentions was to lift standards in the sector.
But Mr Eisen was having none of that line of argument. The AFR quoted the Afterpay CEO said: “As the royal commission has proven, the banks do not set the standard for best practice.”
He expects Afterpay will continue to outperform the rest of the market: “The bulk of the way [Klarna] makes its money is applying a new skin to a traditional credit lending model. They are retro-fitting a customer-centric approach into an old model which is in a lot of ways broken.”
Is The Afterpay Share Price A Buy?
The Afterpay share price is down 0.7% so far. I think it’s going to be a long, drawn out conflict between Afterpay and other competitors. At the moment I’m not confident that Afterpay can achieve the growth expected of it in the coming years with all this new competition.
I think the growth shares in the free report below are easier to evaluate for market-beating potential.
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