BNPL allows consumers to make purchases with no upfront payment by paying for the purchase via interest-free instalments.
Afterpay has the first-mover advantage
Afterpay’s most recent reported financial result was the December half 2018 where it made total income of $112.3 million.
Revenue is split between Afterpay income, Pay Now revenue, and Other income.
Participating merchants pay a fee to Afterpay for using the Afterpay service and this income from merchant fees makes up Afterpay income.
Consumers that make purchases using Afterpay will not pay interest if they pay their instalments on time, however, they will incur late fees otherwise, which makes up Other income.
Afterpay income contributed 75.8% of total income for the December half and Other income or late fees contributed 16.2%.
The remaining 8.0% was the Pay Now business, which primarily generates its revenue via transaction fees for delivery of completed transactions.
At its current share price of $27.79, Afterpay has a market cap of $6.63 billion.
Zip has backing from Westpac and is a licensed credit provider
Zip Co generated $34.2 million in revenue for its December half and its current share price of $3.60 results in a market cap of $1.26 billion.
The BNPL are seen as disruptors to the credit card space, which is dominated by the big banks, however, Westpac Bank (ASX:WBC) is a major shareholder of Zip with 15.85%.
Many investors believe Zip has a lot to gain from a relationship with Westpac.
Through the brands zipPay and zipMoney, Zip provides customers with interest-free BNPL options.
Zip also owns a third brand, Pocketbook, a personal financial management tool which provides customers with real-time categorisation of spend, credit tracking and financial insights.
Notably, Zip is a licensed and regulated credit provider and performs credit and IS checks for all applicants.
Zip does not break down its revenue but it said late fees make up less than 1% of revenue in the December half.
Splitit uses Mastercard and Visa
Splitit is the newest entrant to the BNPL space having completed an IPO in January 2019 with shares priced at 20 cents.
Unlike Afterpay and Zip, which consider themselves as alternatives to credit cards, Splitit customers must have a valid credit card.
Splitit derives revenue from merchant fees only and generated $0.55 million in merchant fees during the recent March quarter.
At its current share price of $1.09, it has a market cap of $293.9 million.
Splitit hit its all-time high of $2.00 in mid-March 2019.