A decline in sales growth, million-dollar losses and more regulations could spell bad news for the controversial sector.
Australian buy now, pay later suppliers have taken a beating in the stock market with stocks plummeting an average of 80 per cent with the sector losing millions and a reported drop in consumer interest in the product.
Investors have been struggling to sell stocks with prices falling close to 12 percent in a single trading session.
The Australian market is saturated with BNPL providers with 12 trading on the Australian Stock Exchange, the most anywhere in the world.
Afterpay reported a loss of $ 156.3 million over the last financial year, representing an increase of almost 700 percent compared to last year.
Zip, BNPL’s rival service, also reported a loss of $ 652 million, a whopping 3000 percent increase from last year, where it had announced a $ 20 million shortfall.
Grant Halverson, CEO of McLean Roche Consulting, said many people were shocked by Zip’s dramatic loss.
“The sector lost more than $ 1.05 billion in 2021, which has worried many investors,” he said. The Guardian.
“Most of the 2021 reports from BNPL applications were bad, as sales growth slowed, credit losses increased and cash burning increased, with a number that seems questionable in terms of cash flow.”
It comes as consumer groups warned that BNPL’s services could contribute to a “debt spiral” for people already struggling, with calls for the industry to be more strictly regulated like other financial products like credit cards. .
Katherine Temple, Policy and Campaign Director for the Consumer Action Law Center, has previously noted that young people could end up in trouble if they rely on BNPL’s services.
“The Buy Now Pay Later providers are normalizing the debt of really young Australians who are at the beginning of their financial independence and the decisions we make when we are young can have long-term implications for our future money,” he said.
“I think generally people should know that this product is not free, especially if they can’t pay on time and it can easily become a problem.”
Meanwhile, Zip shares have plunged 63 percent from their peak, while another provider, Openpay, has racked up a string of bad debts as it entered the US and UK markets with warnings that it could fail if no more funds or new actions were raised. issued, according to the accounting firm PricewaterhouseCoopers.
Lesser-known players like IOUpay saw a dramatic 96 percent drop from their peak, according to Halverson, and another called Fatfish fell 84 percent.
Adding to the already fierce competition, payments giant PayPal also announced that it was making its way earlier this year by offering BNPL to its nine million Australian customers, but said it would not charge late fees.
In what could compound the sector’s troubles, the Reserve Bank of Australia (RBA) has also signaled rule changes to allow retailers to pass on fees charged by BNPL providers to customers, which could cause the payment option is much less attractive.
Halverson also noted that RBA figures showed BNPL’s spending is flat, with sales of $ 11.5 billion in one year, suggesting that the sector may have peaked already in Australia.