(Australian Associated Press)
Afterpay Touch shares have shed another X after the buy now, pay later provider responded to the Reserve Bank’s interest in the industry by describing itself as a “marketing channel” with services beyond payment processing.
The RBA said last week it would consider whether “policy action” is required in response to operators in the burgeoning buy now, pay later sector preventing merchants from passing costs to customers in the same way they do with credit card surcharges.
Apparently trying to reassure rattled investors in what has been one of 2019’s market darlings, Afterpay on Monday said it was not currently subject to any RBA inquiry or review process and would engage with the central bank’s review of the payments industry next year.
But Afterpay shares, which were at an all-time high $36.395 before losing 20 per cent of their value across three trading sessions last week, dropped another 3.3 per cent on Monday to close at $28.66.
Last week’s RBA payments system board annual report did not mention individual buy now, pay later services, but noted services are relatively expensive for merchants, who are usually prevented from passing on the cost to the customers who benefit.
In response, Afterpay said it sits above existing payments infrastructure and delivers value to retailers beyond the payment processing aspects of a transaction.
“Afterpay is a marketing channel to millions of hard to reach core millennial and Gen Z consumers,” the company said in an ASX release.
“Afterpay directs millions of leads per month to many thousands of small to medium businesses … [and] guarantees upfront payment to all of its merchants and covers all fraud and non-payment related risks.”
The company also noted that it does not operate across all retail sectors and that Australia was unusual among developed nations in allowing credit card surcharges.
Like other similar businesses, Afterpay allows consumers to buy an item immediately with a smaller up-front payment, and then pay the rest via intervals thereafter.
A late fee applies to missed payments, while Afterpay also charges retailers a percentage of each transaction.