At the time of writing, the share price of Zip Co Ltd [ASX:Z1P] is trading at $6.00, down 0.83%.
This on news of a recent ASIC report on the growing popularity of the ‘buy now, pay later’ (BNPL) sector.
Source: Optuma
How did Zip Co participate in the investigation?
The BNPL sector is rapidly growing. Throughout 2020 it saw an enormous boost with people shopping from home more.
Being a relatively new way to pay for goods compared to credit cards, this means the industry and regulators are still trying to find their feet.
Zip actively participated in the report’s preparation, providing ASIC with several rounds of internal data.
However, as the sector grows, so do the potential risks.
The Brisbane Times noted from the report:
‘One in five users of buy now, pay later apps have been missing payments and going without meals to pay their bills but the corporate regulator will not recommend tighter regulation of the burgeoning sector.’
There are the nearly ubiquitous big players that seem to be everywhere such as Z1P and Afterpay Ltd [ASX:APT].
Then there are also a host of others such as industry-tailored providers. INKPAY for instance, for the tattooing industry.
Art Money, for the art industry.
The Sydney Morning Herald wrote that:
‘ASIC acknowledged that some users were experiencing financial hardship with 21 per cent of buy now, pay later (BNPL) users who responded to its survey reporting they had missed a payment in the last 12 months.’
Something to consider going forward, to be sure.
How will this effect Zip Co?
Regulatory changes are certainly a factor that needs to be considered when looking at the Z1P share price.
In the short term for the Z1P share price it might not mean much, but this remains a long-term challenge for the entire BNPL sector.
Source: Optuma
The share price went on a massive run this year as people shopped from home.
Now sitting above the level of $5.80, the Z1P share price looks to be moving sideways.
If it can rise above $6.92, this may prove to be a bullish signal.
Or alternatively, if it falls below $4.74, a bearish move could play out.
Right now, it looks to be trying to decide what to do next.
With JobKeeper and JobSeeker bonus payments due to be rolled back in the coming quarters, this could be a risk to the BNPL sector.
As well as the regulatory angle we just discussed.
Which is why you should be keeping your eyes peeled for fintech alternatives, like these three small-caps.
In this recently released report you will get the details on one BNPL stock that could prove more resilient than others due to its exposure to non-retail customers.
You can download that for free, right here.
Regards,
Carl Wittkopp,
For Money Morning
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