BNPL apps face a challenging time as interest rates start to ramp up.
None of the Fintechs BNPL apps are profitable, they are all unregulated with massive bad debts, four – ten times that of credit card issuers (it should be the other way round).
‘FREE’ MONEY COSTS
Allowing consumers ‘free’ money is great when interest rates are artificially low and governments/central banks let ‘helicopter’ money rip, as the last two years show.
However once interest rates rise above 2.75% all these apps face potential armageddon – having to fund consumers ‘free’ purchases from 14-42 days, while paying merchants immediately the order is made (well, some don’t, they wait until ‘goods are dispatched’ very sneaky).
USA INTEREST RATES SET TO RISE
The US Fed is set to raise interest rates at its next meeting, the current market view is this:
Interest rates increases flow directly to BNPL operating costs and as many raise money by securitizing their receivables or using mezzanines, the cost of funding will increase exponentially due to the high bad debt risks.
USA TECH STOCKS PLUNGE
US Tech stocks sank another 4% on Friday (US time) with a 13% loss for April – see WSJ pce below.
Amazon had its worst year in 7 years, PayPal revised down its growth for the second straight quarter, while Google also had the very poor result – amping up pressure on any online businesses.
USA ONLINE SALES DECLINE
US online retail sales rose rapidly during 2020 peaking at 15.7% in the second quarter. They fell back to 12.9% in the last three months of 2021, according to US Census Bureau -see chart
This online decline has heaped pressure on all ‘at home stocks’ example are:
Affirm – down 84% from 2021 peak
Shopify – down 76%
PayPal – down 72%
Block/Afterpay – down 66%
Adyen – down 43%
AUSTRALIAN BNPL FACE MORE PAIN
Australia’s BNPL stocks once valued at $46.4 billion, today are valued at A$1.19 billion (this excludes unprofitable Afterpay sold to profitable Block (Square) with implied value of US$4.6 billion).
Shares closed 29th April verse peak prices – expect more declines on Monday as ASX reacts to Wall Street.
Payright – down 86%
Splitit – down 86% (peak Aug 2020)
Fatfish – down 91%
Zip – down 92%
OpenPay – down 92% (peak Aug 2020)
Douugh – down 93 %
Laybuy – down 96% (since 2020 IPO)
IOUpay – down 97% (peak Dec 2002)
Australia had 12 BNPL stocks – the rest of the world has 4 that’s a huge clue.
Australian BNPL stocks disappearing at an alarming rate – 33% have disappeared in a matter of months – 12 down to 8!!
Afterpay – sold to Block
Humm – sold to Latitude
Sezzle sold to Zip
Zebit – delists shares and returns to USA
Source: LinkedIn.com