The ASX was higher to midday.
The S&P/ASX200 had gained 69.30 points or 0.94% to 7,451.20 at time of writing, despite crossing below its 20-day moving average.
Over the last five days, the index is virtually unchanged, but is currently 2.38% below its 52-week high.
The top-performing stocks in the ASX 200 are Champion Iron Limited up 6.12% and Fortescue Metals Group (ASX:FMG) Ltd up 5.44%.
Before or after?
With Afterpay having done so well since it listed in 2016, it was inevitable that a raft of similar companies would join the fray.
In the BNPL (buy now pay later) space, we have seen Zip Pay, Open Pay, Zip Money, LayBuy, Latitude Pay, the list is endless.
Now, a new player is entering the ASX, playing on Afterpay’s name, but with a totally different service: Before Pay.
Before Pay will list at a $158 million market value, with shares expected to be sold at about $3.40 each.
Interestingly, the group is chaired by former Westpac boss Brian Hartzer and operates in the pay on demand sector, meaning customers can access some of their salary before getting paid.
That seems dangerous, however, it is not payday lending as customers don’t accrue compound interest and the most ever owed is 5% of what is borrowed.
Beforepay is looking to raise about $35 million in a deal overseen by Shaw and Partners and Evans and Partners.
Beforepay is yet to generate a profit, however, its revenue is said to be growing at approximately 30% per month.
The company has 126,000 active users with a 94% repeat use rate.
Beforepay’s annual income for the 2021 financial year was $4.5 million.
Banks vs BNPL
We spoke to Wealth Within founder and analyst Dale Gillham about his take on the BNPL space.
“The war between the big four banks and the buy now pay later (BNPL) space heated up this week as Afterpay released its new money app, which is targeting Gen Z and millennials, and is another step forward in Afterpay becoming more like a bank.
“As I have stated in previous reports, the big four banks are good at sitting back and watching others take the risk to develop a market before entering, and this is very much what they have done in the BNPL space. Two weeks ago, Westpac joined CBA in offering a zero-interest credit card aimed squarely at the same marketplace as Afterpay. Given this, I suspect it won’t be too long before ANZ and NAB join the party.
“The big point of difference between the banks and those in the BNPL space is in the area of lending, and I believe the banks have a distinct advantage. It is one thing to provide a service where individuals can buy an item and pay for it over a month but Gen Z and millennials also need to be able to borrow for housing and other loans.
"Another advantage the banks have is that they are already regulated with well-established compliance systems. However, until recently compliance and regulation has not been a concern in the BNPL space. But ASIC has made it clear that they are looking at regulating this market, which is likely to add red tape for BNPL organisations, resulting in reduced profit margins.
“That said, the banks can be old, stale and slow to move as they are all big elephants with old systems, while the BNPL space is the new frontier. So, the next few years will be interesting to watch as they release new products in an attempt to gain more market share.
“The obvious winner in all of this will be the consumer, as more competition means lower prices, better services and better products. Right now, while some of the stock prices for the BNPL providers are not doing very well, I would still watch this space given that in 2022 it is likely we will see some nice movement, especially with the larger providers. So, while I commend Afterpay for releasing this new product, now is not the time to enter this stock.”
On the small cap front
Latrobe Magnesium Ltd (ASX:LMG) is up 11.54% having added A$11.5 million to the store cupboard in its recent capital raise.
Fe Limited (ASX:FEL) is up 3.23% after it amended a deal with iron ore stock GWR Group Ltd to stagger a series of payments and extend its mining rights into mid-2024.
FYI Resources Ltd (ASX:FYI) is up 2.7%. FYI and alumina refiner Alcoa Australia Ltd are readying for an extended high purity alumina (HPA) production trial.
American Rare Earths Ltd (ASX:ARR) is up 1.18%. ARR strengthened its cross-cultural communication and inclusivity expertise with the appointment of Melissa Sanderson as a non-executive director.