Buy-Now, Pay-Later Market Consolidation Heats Up
PayPal Buys Paidy for $2.7 Billion
The buy-now, pay-later market is heating up with PayPal (PYPL) making the latest move, spending $2.7 billion to acquire Paidy, a Japanese BNPL startup. The deal comes a few weeks after Square (SQ) purchased Afterpay for over $29 billion. Meanwhile, late last month, Amazon (AMZN) struck a deal with Affirm (AFRM) to let customers make installment payments on purchases of $50 or more.
The BNPL market has been around for several years but has taken off during the pandemic as more people than ever shopped online. BNPL companies including Afterpay, Affirm, Paidy, and QuadPay charge merchants a fee to enable customers to make installment payments on small purchases at the point of sale.
PayPal Expands Its International Footprint
While PayPal is seen as one of the leaders in the BNPL space, its move to expand into Japan, the third largest ecommerce market in the world, may have been prompted by Square’s acquisition of Afterpay and resulting bigger presence in Australia. To maintain its lead, PayPal has to enter more large markets. Japan seems like a good place to start. Online shopping sales in the country have surged to $200 billion.
Paidy lets customers make purchases online and pay for them with cash in convenience stores located across Japan. They can also pay via a bank transfer through the service.
Currently, Paidy has more than 6 million registered users.
Dealmaking Heats Up
Once the deal closes, Paidy will operate as a standalone business, retaining its brand and management team. The company uses its in-house technology to gauge borrowers’ ability to pay back the short-term loans.
The BNPL market has been heating up in recent months as dealmaking and partnerships abound. This trend makes sense. Many younger consumers are reluctant to make purchases on credit, concerned about the idea of paying interest. BNPL provides an interest-free way to make a purchase in installments. With the popularity of BNPL poised for continued growth, it will be interesting to see which payment company strikes a deal next.
Does Everyone Need an Estate Plan?
The short answer is yes, estate planning can be a smart move for everyone.
Though it’s not fun to think about what will happen to your loved ones after you are gone, doing some estate planning early on and readjusting as needed throughout your lifetime can help you prepare for the future and protect the people you care about.
One of the biggest reasons why is that without an estate plan, your assets may not go to the people you wished to inherit them. And, if you have children, you won’t have a say in who becomes their guardian.
Not having an estate plan can also create a lot of legal and administrative headaches for your family members and heirs.
Contrary to what many people assume, you don’t have to be old, rich, or have children to benefit from making a financial plan for after you are gone.
SoFi, in partnership with Ladder, now offers estate planning as part of SoFi Protect. Draft your will for free and plan for your long-term financial future—because no financial plan is complete without considering the needs and goals of those you love.
A Weekly Column With Liz Young
Every week, SoFi’s Head of Investment Strategy shares her economic and market insights in order to help empower readers to take a more active role in their financial futures. This week, see what Liz has to say about rate implications.
Hypersensitive or Hyperparanoid?
We’re obsessed with rates. Sovereign bond rates, policy rates, the direction of rates, and the rate of change in rates.
Are we overhyping the topic? Can we glean any definitive investment guidance on how to position our portfolios based on it?
Just Can’t Get Enough...of the 10-Year?
As U.S. investors, when we talk about “rates” we’re usually talking about the 10-year Treasury yield. It’s largely viewed as a barometer for long-term economic growth and inflation — a gauge for investors as they try to decide what lies ahead.
At least, that’s what it used to be.
It’s still a barometer, but with the Fed currently absorbing 60% of net Treasury issuance, and the fact that our 10-year sovereign bond yields more than many developed sovereigns, Treasurys are attracting foreign buyers at unprecedented levels. There’s also plenty of domestic demand for Treasurys from large institutions that need to manage liabilities and risk.
In fact, the 10-year Treasury auction in August had a bidder participation rate (a measure of appetite for Treasurys excluding the Federal Reserve) of 90.3%--the highest ever. The auction just conducted yesterday had a bidder participation rate of 87.7%--the second highest ever. For reference, the average since the Fed began purchasing assets in Nov. 2008 is 64.7%.
That level of demand keeps a lid on yields, and a lid on yield volatility. And since it’s demand outside the Fed, even when tapering begins, the lid may loosen, but stay on the jar.
Bottom line: movements in the 10-year yield and its absolute level cannot be viewed as direct reflections of economic expectations or monetary policy action.
Calling Sectors Friends or Foes
But can the 10-year yield be used as an indicator of sector winners and losers? Typically, we’d expect financials to do well in a rising rate environment, but the question is how well?
From Nov. 2008, when quantitative easing (QE) began, through today, we found 16 periods when the 10-year yield moved meaningfully up or down (a move of 1.3% to 1.5%). Admittedly, this is a small sample size, but it was important to isolate the QE regime.
We found, unsurprisingly, that when yields rose, financials beat the S&P 500 by an average of 7.4%. When yields fell, financials underperformed the S&P 500 by an average of 8.4%.
But, surprisingly, during the same periods, when yields rose, technology also beat the S&P 500 by 8.7% (and beat it by 4.4% when yields fell). But aren’t rising rates supposed to be bad for technology? Maybe not under this policy regime.
Survey Says: Hyperparanoid
We’re obsessing too much. Rates matter, but they shouldn’t drive too much of your allocation decisions and they can be a poor indicator of equity market behavior. Even though I believe the 10-year yield will move higher through the rest of the year, it probably won’t happen in a straight line. Instead of focusing so much on rates, I think we can be better served by focusing on economic growth, corporate fundamentals, and the state of the global consumer.
Amazon Expands Cashierless Technology in Whole Foods Stores
Amazon Tests Cashierless Checkout on a Larger Scale
Amazon (AMZN) plans to bring its cashierless checkout technology to two new Whole Foods stores slated to open next year. Shoppers in Washington, D.C. and Sherman Oaks, California, will be able to skip the checkout line when shopping for produce and other grocery items.
The technology, which Amazon calls “Just Walk Out,” is being deployed across a growing number of the ecommerce giant’s physical stores including its Fresh grocery stores and Go convenience stores. Deploying its technology in Whole Foods will give Amazon an advantage over startups that have developed similar checkout systems but struggled to get larger retailers to embrace the changes required for the technology to work.
How Amazon’s “Just Walk Out” Technology Works
With Amazon’s “Just Walk Out” technology, customers scan an app when they enter and exit the store and are then able to bypass the checkout line. Amazon has cameras and sensors deployed throughout the store that track the items shoppers choose and take home.
Shoppers at the two new Whole Foods stores will have the option to scan an app, insert a credit or debit card linked to their Amazon account, or use Amazon’s palm scanning payment system, Amazon One. In April, Amazon rolled out the new payment system in a Whole Foods in Seattle. It is currently deploying the technology in other stores. Customers can also use a self-checkout counter or visit the customer service booth to check out.
Labor Unions May Cry Foul
Amazon’s expansion of its cashierless technology is expected to raise concerns for labor unions, which have warned that the technology will eventually replace cashiers. Amazon has said this is not true, arguing that the technology simply frees workers to perform other tasks in the stores. The two new stores will employ the same number of people as Whole Foods stores of similar size that do not have the new technology.
Amazon has been slowly and methodically rolling out its cashierless technology. Now, it is preparing to test the system on a larger scale. It will be interesting to see how consumers and other retailers respond.