APT launching an in-app virtual card in the US for Amazon, Sephora, Macy's and a few other stores, identical to the quad pay and Klarna system but without the quad pay fees and limited to behaving customers. Based on interchange and affiliate revenue RBC estimates this will actually be margin accretive, meaning >4% revenue is expected. This will also be a kick in the guts to Klarna and Sezzle who had partnered with Macy's and Sephora, and Target respectively. 
App downloads are neck and neck between Afterpay and Klarna in the US, so this is an interesting development. Even though it is targeted to repeat customers it may drive new customers to the platform. It'll also clearly raise spend per customer, and improve customer stickiness.

All in all a great win for the company and a nice pivot from just trying to sign up merchants for direct integrations.

Afterpay have had perhaps a surprisingly resilient margin over the years, and I believe this will be managed well into the future. Their net transaction margin history: FY16 2.1%, 17: 2.5%, 18: 2.6%, 19: 2.3%, FY20: 2.3%, FY21H1: 2.2%. And this last result is indeed impressive given that 50% of volume in FY21H1 came through the newer markets of UK and US where scale benefits have not yet been reached.

My bullish take on margins:

1. Competitive pressures: short-medium term, there has been no pressure on revenue margin, holding steady at 3.8%. It is possible merchant growth has slowed a little, but Afterpay has managed to retain its pricing power with the merchants who do choose to join. 
2. Competition long term: BNPL industry will consolidate, with the minnows eventually going out of business due to lack of scale preventing profitability, or merging or being acquired. Paypal is an interesting case. They charge 2-3% vs. Aftepay's 3.8% average. However, Afterpay is a pure pay in 4 product, whereas Paypal is charging that fee for its pay-upfront product too. Their pay-upfront product is arguably over-priced, so adding on pay in 4 has simply made Paypal's core offering better value to merchants. This, I think, is why Afterpay has stuck to splitting purchases in 4 and not offering "pay in full upfront". It has kept its core value proposition to merchants, that is: "hey, we ONLY give your customers a pay in 4 option, so they have 4x spending power, so pay us a few % more, K?" (simplistic but you get the gist).
3. Scale: As afterpay's volumes increase, it negotiates better terms with payment processors, improving margin.
4. Customer base maturing: as Afterpay matures in each market, bad customers are weeded out, and losses improve. This improves margin.
5. The dark horse: Afterpay Money - any customers that sign up to this bank account will be able to make Afterpay payments directly without card-payment rail involvement, saving Afterpay in processing costs. This banking platform is supposedly built to be back-end-bank agnostic through 10x Banking, so ideally Afterpay will be able to replicate this product around the world with retail banking partners overseas. 
6. The long tail of smaller merchants. Afterpay enters new markets signing up big merchants, then as they build the network of customers, smaller merchants rush to get on board. Smaller merchants pay more, 6% +30c is typical. Afterpay has more customers in the US than AU (double) but has more merchants in AU than the US, so there is a way to go yet in the US. 

FY22 GTV to be 70% above guidance i.e. $34b, applying conservatism too.

Assumptions

Beyond our frequency changes our analysis is based upon a conservative set of assumptions:

1. Australian additions decline
2. The rate of US customer additions stays flat going forward (realistically it is increasing)
3. The rate of UK customer additions stays flat going forward (realistically it is increasing)
4. Basket size stays flat at $150 (it increased over 2019), there is also upside from Afterpay’s new variable payment upfront option which allows for higher basket size
5. Whilst we don’t include churn we think this is more than captured within our conservative additions forecasts
6. We only expect a slight tick up in frequency before it moderates

https://www.livewiremarkets.com/wires/we-see-afterpay-beating-its-fy22-gross-transaction-volume-gtv-guidance-by-least-70

A couple of bears and a lot of bulls today. Nice bit of back and forth.

https://twitter.com/LT3000Lyall/status/1168697116559994882

Listen to Episode 2 from 3:10 for an insight from a fund manager on Afterpay. Recorded in February 2019.

https://www.fraziscapitalpartners.com/podcast

Also look here for a write-up https://www.livewiremarkets.com/wires/afterpay-early-traction-in-the-usa

This fundie’s modelling says $35/ share. And “If the product is in any way as pervasive in the UK and US as it is in Australia, we would expect this to be the beginning of a new global payments platform.”

https://www.livewiremarkets.com/wires/braitling-valuation-has-never-mattered-less

Bull case on Afterpay and Z1P, with preference towards Afterpay. The same writer had preference towards Z1P one year ago, but has now changed the view on the basis that Z1P seems "landlocked" to Australia.

https://www.livewiremarkets.com/wires/buy-now-pay-later-still-a-good-buy

One year ago article:

https://www.livewiremarkets.com/wires/like-buying-xero-in-the-early-days