The Openpay Group Ltd (ASX: OPY) share price has rocketed up by 160% since Monday. Followed hot on its heels was Zip Co Ltd (ASX: Z1P) which saw its share price rise by 59.95% so far this week. This was after announcing the acquisition of New York-based QuadPay, giving it access to the $5 trillion dollar US retail market.
However, the higher Openpay share price rise is more intriguing. At the end of April, the company reported a 113% growth in the number of its active customers before announcing an institutional share placement on 4 June. This would raise over $30 million for the company to use towards further growth and could signal the start of a wider boom across the buy now, pay later (BNPL) sector.
The largest Afterpay Ltd (ASX: APT) challenger
The rise of Afterpay to a $13.98 billion ASX behemoth has been well documented. Not so the rise of its competitors.
Zip Co is the largest independent challenger of Afterpay. Unlike Afterpay, however, Zip Co credit checks its users. This could prove to be a competitive advantage over the coming months. In times of true recession, when things get tough, unsecured debts could result in increased defaults.
Sezzle Inc (ASX: SZL)
The Sezzle share price is up by 41.75% this week. Unlike many of the other BNPL companies on the ASX, Sezzle is headquartered in the United States. So while others are trying to buy their way in, Sezzle is a market native.
The company already boasts a network of 1.3 million users and 14.9 thousand merchants. It has also secured a fighting fund of US$100 million. In addition, the company is already making moves towards the US$460 billion Canadian retail market.
Splitit Ltd (ASX: SPT)
The Splitit share price is up by 78.26% so far this week. The company announced an increase in merchant sales volume by 321% compared to May 2019. Also headquartered in the US, the company does not have to push its way into a foreign market. With a network of 964 merchants, it is clearly the junior player thus far.
EML Payments Ltd (ASX: EML)
EML is not immediately recognised as one of the major BNPL players. This company made its name in gift cards sold in supermarkets. However, EML is one of the great enablers of the ASX fintech sector. The EML share price has risen only 9.3% this week. I believe this to be an unfairly small gain when compared to the meteoric rise of the Openpay share price.
Its product, ControlPay, is the technology under the hood of many BNPL companies today. It is the platform processing payments for Zip Co’s ‘shop everywhere’ functionality. It is also being used by Sezzle in the US as well as Scalapay in Italy.
Foolish takeaway
The slow death of credit cards is being brought about by Gen Z and Millennials. This is clearly a large-scale business transformation, and one that will likely see many of the companies mentioned above grow significantly.
Even with the large rise in the Openpay share price, I think EML is best placed to benefit over the medium to long term. By operating the back-end technology that powers some of its cohorts, the company is less exposed to unsecured debt. It also gets to process payments across many companies and countries with little competitive tension.
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Daryl Mather owns shares of Sezzle Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, Emerchants Limited, and ZIPCOLTD FPO. The Motley Fool Australia has recommended Emerchants Limited and Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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