Afterpay’s Nick Molnar thinks millennials and Gen Z won’t trust buy now, pay later products from the Commonwealth Bank and PayPal

Nick Molnar says a general distrust of financial institutions will see millennials stick with Afterpay. (Louie Douvis, SMH)
  • Afterpay co-founder Nick Molnar has downplayed the competitive threat posed by PayPal and the Commonwealth Bank as both eye an entry into the buy now, pay later (BNPL) sector.
  • Speaking on Friday, Molnar claimed both would have an “inherently difficult time” navigating the market and that both would need to go beyond simply offering a similar product to compete for millennial and Gen Z customers.
  • “Our core consumers have a lot of distrust for many financial institutions but a huge amount of trust for Afterpay,” he said.
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The surprise entry of two finance and payments behemoths into the buy, now pay later (BNPL) space isn’t keeping Nick Molnar up at night.

The billionaire co-founder of Afterpay has played down the competitive threat posed by the Commonwealth Bank, Australia’s biggest bank, and payments giant PayPal, after both announced their intention to jump into the burgeoning market.

The companies, valued at $153 billion and $360 billion respectively, dwarf even the likes of Afterpay, which valued at $30 billion, with both now attempting to recapture younger customers.

Speaking at an event on Friday, Molnar suggested both would struggle to win the confidence of the key millennial and Gen Z demographics on which Afterpay built its business.

“Our core customer is a very different core consumer to other payment providers in market that haven’t been able to engage with the next generation so I feel that we’re really well placed to compete and scale on the same trajectory as what we have to date,” he said.

“Our core consumers have a lot of distrust for many financial institutions but a huge amount of trust for Afterpay.”

Afterpay customers, after all, are the same who grew up through the global financial crisis (GFC) in 2008 and 2009 and a damning banking royal commission a little more than two years ago.

More recently, a global pandemic has taken much of the shine off credit, with credit cards well and truly in decline.

It is BNPL providers that have largely benefitted from and even driven that downward trend, while traditional banks like CBA have had to face the fact that young customers aren’t spending like they used to and certainly aren’t interested in paying sky-high interest rates.

This is not to say that BNPL products aren’t without their own risks. As ASIC deputy chair Karen Chester noted earlier this month, for one in five customers buy now pay later is simply “a very expensive form of credit”.

As platforms amass millions of new customers every year however, BNPL products can also pose a major competitive threat or a key business opportunity. CBA and PayPal shouldn’t expect switching lanes to be easy however, Molnar warns.

He points out that within just two years North America has become Afterpay’s largest market and is still growing quickly, despite PayPal having introduced the product there in September last year.

“Companies that started life as financial providers and then try to come down into our space have an inherently difficult time to build the uniqueness and simplicity of our value proposition,” the co-CEO of Afterpay said.

“From our perspective it’s certainly a validation that there’s a real shift from credit to debit.”

With CBA and PayPal’s products to both become available from the middle of this year, Molnar’s confidence will be tested soon enough.