US giant PayPal announced its move into BNPL and Australia fintech stocks are getting smashed

The elephant entered the buy now, pay later (BNPL) room on Tuesday and the rockstar stocks of the ASX took a massive hit as a result.

PayPal announced the launch of its ‘Pay in 4’ platform in the US, which mimics Afterpay’s 4 instalment solution.

The announcements sent Australian-listed BNPL shares into a nosedive, with the three of the biggest players Afterpay (ASX:APT), Zip Co. (ASX:Z1P) and Sezzle (ASX:SZL) falling between 10% and 12%, while Humm (ASX:FXL), the freshly rebranded Flexigroup, Openpay (ASX:OPY) and Splitit (ASX:SPT) dropped 5-7%.

Just days after some expected Afterpay, which has seen its share price soar more than 1000% since March, to hit $100, it instead closed at $84.09.

The US has been a major market for Afterpay’s expansion, with 5.6 million users. Zip has more than million through its acquisition of Quadpay, which the company confirmed was complete yesterday. One quirky aside for QuadPay investors is that Zip’s soaring share price since the deal was locked in back in June means that the 118.8 million Zip shares exchanged as part of the sale means the cost of the acquisition has doubled in value since then to more than $800 million.

Meanwhile Australian BNPL stocks are being hammered again today.

Buy now pay later shares drop for a second day in a row after news that Paypal is entering the market. Pop$APT 80.87 -3.75%
$Z1P 7.13 -10.64%$SPT 1.63 -5.51%$SZL 7.82 -10.05%$OPY 3.78 -6.23%$PYPL 210.42 +3.24%#ausbiz #asx #afterpay @IGSquawk

— Karim RAFFA (@karimraffa) September 2, 2020

Paypal is hoping to roll out Pay in 4 in time for the US holiday season offering the option of four interest-free instalments over six weeks, on products costing between US$30-600.

Echoing the pitch of the Australian fintechs in the market, Doug Bland, senior vice president of global credit at PayPal said retailers “are always looking for new and trusted ways to increase sales” without additional risk or costs as consumer look for more flexible ways to pay online.

“With Pay in 4, we’re building on our history as the originator in the buy now, pay later space, coupled with PayPal’s trust and ubiquity, to enable a responsible and flexible way for consumers to shop while providing merchants with a tool that helps drive sales, loyalty and customer choice,” he said.

BigCommerce, the US-based former Australian startup is among those signing up to for the initial launch of Pay in 4. PayPal dominates US ecommerce with around 80% market penetration and charges a smaller commission than Afterpay. The Australian fintech’s one advantage is its transaction cap is US$2000, more than treble Paypal’s.