Buy now, pay later, suppliers reveal millions of losses

Investors have been scrambling to sell stocks that have fallen nearly 12% in prices in a single trading session.

The Australian market is saturated with BNPL providers with 12 listed on the Australian Stock Exchange – the largest number in the world.

Afterpay reported a loss of $ 156.3 million for the last fiscal year, up nearly 700% from last year.

Rival service BNPL Zip also reported a loss of $ 652 million, a whopping 3,000 percent increase from last year when it reported a $ 20 million deficit.

Grant Halverson, chief executive of McLean Roche Consulting, said many people were shocked by Zip’s dramatic loss.

“The sector lost over $ 1.05 billion in 2021, which worries many investors,” he said. The Guardian.

“Most of the 2021 reports from BNPL applications were bad, as sales growth declined, credit losses increased, and cash consumption increased, a number looking questionable in terms of cash flow. “

It comes as consumer groups have warned BNPL’s services could contribute to a ‘spiral of debt’ for those already in trouble, with calls for the industry to be more strictly regulated like other financial products. such as credit cards.

Katherine Temple, director of policy and campaigns at the Consumer Action Law Center, has previously pointed out that young people could have problems if they rely on BNPL’s services.

“Buy now, pay later, suppliers are normalizing the debt of very young Australians who are in the early stages of their financial independence and the decisions we make when we are young can have very long term implications for our future money,” he said. she declared.

“I think in general people should know that this product is not free, especially if you can’t pay on time and it can easily become a problem. “

Meanwhile, Zip shares fell 63% from their peak, while another provider, Openpay, racked up a series of bad debts as it entered the US and UK markets with warnings that it could weaken if more money was not raised or new actions. issued, according to the accounting firm PricewaterhouseCoopers.

Lesser-known players like IOUpay have seen a dramatic 96% drop from its peak, according to Mr Halverson, and another called Fatfish has fallen 84%.

To add to the already fierce competition, payments giant PayPal also announced it was rushing into space earlier this year by offering BNPL to its nine million Australian customers, but said it would not charge any fees. late fee.

In what could add to the industry’s woes, the Reserve Bank of Australia (RBA) has also signaled changing rules to allow retailers to pass on fees charged by BNPL providers to customers, potentially making the payment option much less attractive. .

Mr Halverson also noted that RBA figures showed BNPL spending was flat, with sales of $ 11.5 billion in one year, suggesting the industry may have already peaked in Australia.