Afterpay share price: Where next as RBA releases payments review?
We examine what the Review of Retail Payments Regulation – Consultation Paper could mean for the BNPL sector.
The new playbook
The Reserve Bank of Australia (RBA) last week released its preliminary conclusions and draft standards on its Review of Retail Payments Regulation – Consultation Paper.
As it applies to buy now pay later (BNPL) companies, the main takeaway from this preliminary paper was that the RBA would not require BNPL companies to remove their no-surcharging rules.
Fact check: in the context of BNPL, no-surcharging means that merchants cannot pass on the costs and fees associated with the provision of a BNPL service to their customers.
Ultimately, the central bank found that there would be no clear public benefit to implementing a no-surcharging rule at this time.
‘The Board has reached the view that there is not a clear public interest case for requiring any BNPL providers to remove their no-surcharge rules at this time.’
Looking ahead, the RBA did however flag that ‘a policy case could emerge in the future and will keep this issue under review,’ though also noted that currently, despite strong growth, the BNPL sector as a whole and in terms of payments processed, remains quite small.
The RBA said it expected to reach its final conclusion on these matters in the second half of 2021.The RBA said it expected to reach its final conclusion on these matters in the second half of 2021.
Morgan Stanley analysts responded positively to this report, reiterating their Overweight rating and $149 price target on Afterpay, while saying:
'We think these are incrementally positive for APT and other buy-now-pay-later (BNPL) providers.'
The investment bank also said potential changes around interchange fees could have a small positive impact on Afterpay:
‘We think this cuts APT's processing cost by ~17bp on some Australian transactions. No proposals on credit fees.’
UBS, it typical UBS fashion, took a sceptical view of the payments review, saying:
‘In our view, the more successful the BNPL sector is, the more likely it will attract regulatory scrutiny and there is a significant risk that no surcharge rules will be prohibited in the future based on today’s announcement.’
Australia’s leading BNPL stocks – Afterpay (ticker: APT), Zip (ticker: Z1P) and Sezzle (ticker: SZL) – have been in a clear downtrend in the last month, amidst growing inflation fears and a rotation from growth to value names.
In the last month, Sezzle has witnessed the most pronounced losses, with the stock down 23% in that period, followed by Afterpay which is down 19% and Zip which has fallen 11%.
This contrasts to the broader market, which has risen in that period, with the ASX 200 up some 2.2% in the last 30 days.
Trade BNPL stocks long and short with IG today
Create an IG account or log in to your existing account to get started now
The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.