US BNPL provider Affirm, which draws a large portion of its revenue from Peloton fitness equipment, has applied for registration down under.
Affirm has followed Peloton into the Australian market as it serves as the exclusive provider of instalment loan options for the fitness equipment company.
It's estimated Peloton accounts for nearly one third of Affirm's group revenue in the United States.
Smaller providers competing against large banks muscling in on the sector has been called a 'dance with elephants' by payments expert Grant Halverson.
"Small mice risk being stomped on," Mr Halverson said.
"A theme developing across ASX BNPL public companies [is] slowing sales, increased losses, bad credit and increasing costs - a direct result of competition and the rushed offshore expansion push."
This was seen in Afterpay's latest financial reports, with losses up 600% on the year prior.
"Credit losses have increased by 21% over and above sales growth – this is for a totally unregulated sector," Mr Halverson said.
"Credit losses are BNPL's largest single expense and in Australia $154 million - or 1.4% of sales - is worse than payday lenders'."
According to Mr Halverson there are 24 BNPL operators in Australia - 12 are listed on the ASX and make no profit despite an average market cap of $35.75 billion.
NAB and CommBank also have 'zero interest' credit cards.
Despite this, Affirm looks to be entering Australia on relatively solid footing.
Quarterly results show users were up 34% to 7.1 million in the US, and annualised revenue was US $1.05 billion - higher than Afterpay's revenue of US $325 million.
It also recently partnered with Amazon to offer instalment options, which eToro analyst Josh Gilbert has labelled "significant".
"Affirm is tapping into Amazon's extensive customer base that spends hundreds of billions of dollars every year, and the brand recognition of working with the world's largest online retailer is second to none," Mr Gilbert said.
"While Affirm’s partnership with Amazon signals vast growth opportunities for the company, it still faces stiff competition in the space, especially when it comes to future partnerships and integrations."
Amazon also has a partnership with Citi called 'Flex Pay' - a sort of BNPL platform that allows Amazon shoppers to choose from a variety of payment plans.
"They [Amazon or Citi] don't talk about it publicly but I'm told it's going very well - in second place behind Paypal and well ahead of Klarna who have 20 million customers (Afterpay has 10.5 million)," Mr Halverson said in July.
Photo by Giorgio Trovato on Unsplash