PayPal’s June quarter result shows BNPL business overtakes Z1P

  • By Elizabeth Fry

PayPal’s second quarter result showed that it continues to gain market share in the buy now pay later market and has overtaken rival ZIP in the hotly contested sector. 

The mobile payments giant on Wednesday reported that the net profit for the second quarter dropped 23 percent from a year earlier to US$1.18 billion, and the company added 11.4 million net new active accounts, for a total of 403 million active accounts. 

Earnings were struck on net revenue of $6.24 billion up 19 percent on the year earlier quarter ending June 30.   

However, the company’s buy now pay later volume grew 49 percent to US$1.5 billion in the June quarter across the US, UK, Germany, and France, up from 36 percent in the March quarter.  

Although PayPal is gaining share, its BNPL volumes continue to trail Afterpay at US$4.8 billion but it has overtaken Z1P at US$1.4 billion, according to Citi analyst Siraj Ahmed. 

“While PayPal could be impacting the growth rates of existing players, we see the addressable market as large and expect Afterpay and Z1P to deliver strong growth,” he said. 

“However, from a medium-term perspective, we see the scale players as better positioned and remain concerned that Z1P's international business lacks scale.” 

Off to a strong start in Australia 

The analyst said that on the result call, PayPal noted that Australia was off to a strong start 

PayPal recently launched its PayPal Pay in 4 service in Australia to compete with rapidly growing players such as Afterpay.  

The quarterly result showed that PayPal also saw a meaningful pick-up in BNPL customer growth, with 4.2 million unique customers using its Pay Later offerings in the June quarter, a 1 million increase from 3.3 million unique customers who used it in March quarter.  

“Since launch, 7 million customers have used PayPal’s BNPL over 20 million times. While not directly comparable, we forecast Afterpay to add 1.7 million net active customers in the fourth quarter. PayPal is also seeing increasing spend per customer, up 16 percent from the March Quarter US$358,” said Ahmed.