BNPL services see share price plummet over the past year

Australian buy-now-pay-later (BNPL) companies have plummeted in share price by an average of 80 per cent compared to the past years’ peak.

Zip has announced a $653 million loss in August with the sector itself losing approximately $1 billion in 2021.

The trend has been linked to swelling losses and unexpectedly low consumer interest in such products by The Guardian.

McLean Roche Consulting chief executive, Grant Halverson, told the Guardian report that Australia has 12 BNPL services listed on the ASX, more than any other country.

“Most BNPL apps’ 2021 reports were bad, as sales growth declined, credit losses increased and cash burn increased, with a number seeming questionable in cashflow terms,” said Halverson.

The sector has come under scrutiny over the past few years, with many wanting tighter regulations to avoid the accumulation of unpayable debts.

Meanwhile, CBA’s group executive, retail banking, Angus Sullivan told the Sydney Morning Herald, “We believe buy now, pay later is a product that can provide benefits to consumers, however there are a number of BNPL providers not undertaking the appropriate checks which can result in customers having access to credit where they potentially shouldn’t,” said 

SMH quotes Sullivan saying, “As shown in our analysis, the lack of credit checks by some BNPL providers have resulted in a higher proportion of customers who find themselves in arrears and financial hardship, which is why we undertake both internal and external credit checks for our customers applying for StepPay.”

CBA, among others such as PayPal, have launched their own products in an effort to capitalise on the disruption to the sector.

The media reports also presaged further disruption to the industry with the RBA indicating that it was considering changes to payment rules to allow merchants to pass the fees that BNPL providers charge retailers onto the consumer.

Halverson told the Guardian that the five-year run of payment systems globally seeing share price growth is a trend that is now over and that there has been spin from BNPL companies regarding their user numbers.