BNPL – Australian Sales Slow in December
BNPL Has Continued to Slow in Australia – December Numbers are Bad?
Official figures for BNPL have annual sales of $11.4 billion (ex RBA)
This compares to $1.56 Trillion retail payments
Card sales (debit, credit, charge cards, prepaid) of $745 billion
So…… BNPL is 73 basis points of total retail payments….. or 1.53% of card sales – either way BNPL is really tiny.
Yet you would think reading much of the fawning Australian media that BNPL was huge and the next big thing. Stock spruikers used to say BNPL would kill off all cards.
Boy…. were they wrong.
After 8 years of spin, bluster and at times a total con job the BNPL apps are in real trouble as their stock prices show.
CARD PAYMENTS HIT RECORD IN NOVEMBER
November 2021 payments were a record for debit, credit cards and charge cards.
November debit card sales $40.7 billion in one month (BNPL apps eyes are watering reading this) was 15.5% up on prior year.
Debit card spend is a massive $12 billion more than 2020 ( That's the entire years BNPL sales)
Credit cards/charge cards sales $31.9 billion for November 14% increase on the prior year.
Charge card (Amex/Diners) sales $5.4b in November 2021
Charge cards average transaction $230
Mastercard and Visa average $92 annually.
So the old legacy payment products are growing while the flashy Fintechs are in trouble as regulators start to wake up.
REGULATORS
BNPL faces regulation in: Ireland, New Zealand, Sweden, Singapore, UK, USA and Europe which already has caps on fees and disclosure of competitive rates.
Yet Australia after 8 years (March 2022) has no lending regulation, no oversight nor are these Fintechs compliant with consume lending responsibilities.
BNPL apps exploit a current loophole in the Credit Acts in Australia.
The Australian National Consumer Credit Protection Act 2009 (NCC) - The NCC does not apply to certain loans, including: low-cost short-term credit (less than 62 days), insurance premiums paid by instalments, bill facilities and staff loans.
BNPL actually means: Bad Non Performing Loans.
REGULATOR ASIC RESEARCH SAYS IT ALL – BNPL’s DEBT TRAP
ASICs own research highlights key issues around young consumers over spending, buying items they don’t need and cannot afford.
Reports in 2018 and 2020 highlight key issues:
44% of users earn less than $40,000,
One in five users are missing payments,
20% of users are cutting back on essentials because of over commitment and
15% sort additional loans to pay off BNPL debits.
BNPL IN AUSTRALIA & NEW ZEALAND
Citi analyst estimated Zip’s website traffic in Australia and New Zealand declined 11% last month, year-on-year and fell 6 per cent for Afterpay.
Visits to the LatitudePay website were down 49 per cent, while Humm website visits declined 17 per cent.
Zip app downloads declined 37 per cent year-on-year in December, while Afterpay’s version fell 2 per cent
BNPL IN USA
Afterpay website visits in December for the first time down 15 per cent.
Afterpay US only recorded 10% growth in downloads in December 2021!
Klarna the market leader in pure BNPL (PayPal leads the category) grew by 70%, while Affirm grew by 90%.
However more troubling is all BNPL apps growth slowed significantly in 2021 vs 2020 with 2021 sales projected at US$68 billion.
US Consumer credit increased by US$40?Billion in November 2021
According to Feds November consumer credit data consumer credit increased at a seasonally adjusted annual rate of 11% to US$4.41?Trillion?(annualized US$52.9 Trillion).
Revolving credit (credit cards) increased at an annual rate of 23.4% to $1.04 Trillion (annualized $12.48 Trillion).
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Afterpay and Zip suffered a Christmas slump, analysts say, as shoppers joined investors in turning their backs on the BNPL space
BUSINESS INSIDER AUSTRALIA John Buckley Jan. 14
·???????Afterpay and Zip each suffered a slump in website traffic and app downloads through the Christmas period.
·???????Australian and New Zealand user activity at Afterpay and Zip fell 6% and 11% respectively, year on year.
·???????Analysts say it could be an early sign that shoppers are leaving the space, as investor interest cools as well.
Consumer activity at Australia’s two largest buy now, pay later platforms suffered a significant Christmas slump, which analysts say could be an early sign that Australians are plotting exit routes out of the space.
In a note to investors on Wednesday, CitiBank analyst Siraj Ahmed cited superficial, mostly publicly available data that suggested both Afterpay and Zip Co suffered noteworthy hits to website traffic and app downloads over the Christmas shopping period.
According to CitiBank, it’s estimated that visits to Zip’s website from Australian and New Zealand IP addresses fell as much as 11% last month, compared to the December before, while Afterpay suffered a 6% drop.
Downloads tallied for each of the players’ mobile apps, meanwhile, fell as well. Zip recorded a drop of 37% compared to December 2020, while Afterpay was rattled only slightly, with a fall of 2% over the same period.
The same dataset suggested that visits to LatitudePay, which late last week?launched a bid to acquire Humm , fell 49% and 17% respectively, but doesn’t account for overall transaction values, which are only available to merchants and the firms themselves.
Ahmed said that while the bank expects transaction values to increase 41% on last year, to $1.3 billion in Australia and New Zealand, its total customer base could come in around 100,000 users lower than market expectations.
As a result, he said, scale has become increasingly important variable in the BNPL sector’s sustainability, particularly as regulators in the US and the UK signal a major payments shakeup.
“Following the Financial Conduct Authority’s review of BNPL in the UK, the US Consumer Financial Protection Bureau last month opened a probe of BNPL products, sending notices to providers seeking additional data,” Ahmed said.
“While increasing regulation is not surprising given the increasing popularity of BNPL, we see the larger-scale players as better-placed given the need to invest in the systems and processes to comply with new regulatory requirements.”
A wave of regulatory shakeups around the world — both in the UK and the US, and more recently, in Australia — has been one factor thought to be unsettling investors in the space as well.
Just days before the?Bank of Spain gave Block the all-clear on its $39 billion merger with Afterpay , analysts at Morgans suggested a jolting tech sell-off in the US coupled with ramped up regulatory plans could be enough to put pressure on the BNPL space.
Morgans equities analyst Richard Coles said the sector’s dominant players — particularly Afterpay and Zip — would need to deliver strong results in the first half of the year to reverse the sentiment.
“The sector is suddenly unloved by investors, so solid 1H22 results are required to change sentiment,” Coles said. “We expect strong revenue growth for Afterpay and Zip, but we still expect both stocks to report (first-half) losses.”
Ahead of Zip’s trading update later this month, Ahmed said CitiBank expects transaction values at both Afterpay and Zip to swell to $2.4 billion in the second quarter of the 2021-22 financial year.
At close of trading on Wednesday, Zip shares were worth $4 a piece on the ASX, up a menial 2% after a six-month spiral, and are on track to fall again come close on Thursday.
Afterpay shares have been trending south on the local bourse too, despite a 4% bump on Thursday which saw shares close at $77, not far above the BNPL giant’s 12-month low of $71.61.
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Fewer Shoppers used BNPL in December
The Australian - Matt Bell
Fewer customers visited and used Afterpay and Zip Co mobile platforms and websites in December (2021) – a critical shopping period – compared to the same time last year, Citi researchers estimated.
In data collated from several sources including SimilarWeb and Sensor Tower, the investment bank said that buy now pay later (BNPL) had a “soft end to the year”.
Zip mobile app downloads declined 37 per cent year-on-year in December, the research note distributed to clients on Wednesday concluded, while Afterpay’s version fell 2 per cent in comparison.
The note comes as Block (Square) prepares to finalise its acquisition of Afterpay, and with Zip expected to provide a trading update late this month.
“We forecast total (transaction values) to grow to $2.4 bn in (the second quarter of the financial year)” wrote Citi analyst Siraj Ahmed.
The bank forecasts total transaction value to increase 41 per cent, year-on-year, to $1.3bn in Australia and New Zealand, 6 per cent ahead of market expectation – although the increase in total customers could be 100,000 lower than had earlier.
Mr Ahmed said scale was becoming increasingly important as regulatory interest in the sector continued to grow.
“Following the Financial Conduct Authorities review of BNPL in the UK, the Consumer Financial Protection Bureau last month opened a probe of BNPL products, sending notices to providers seeking additional data.” Mr Ahmed wrote.
“While increasing regulation is not surprising given the increasing popularity of BNPL, we see large-scale players as better placed given the need to invest in the systems and processes to comply with new regulatory requirements.”
Last month, the US Consumer Financial Protection Bureau issued a series of orders to collect information on the risks and benefits of fast-growing BNPL loans to Afterpay, Zip, Afform, PayPal and Klarna.
The Citi analyst research estimated visits to Zip’s website from users in Australia and New Zealand declined 11 per cent last month, year-on-year and fell 6 per cent for Afterpay.
Visits to the LatitudePay website were down 49 per cent, while Humm website visits declined 17 per cent.
However, the Citi data does not account for in-store activity and transactions directly on merchant apps. All new users may not download the app and existing users could download the app a few months after joining the researchers said.
Latitude Group late last week made a $335m offer for Humm’s credit cards and BNPL business, and the sector continues to consolidate.
The transaction would create a combined Latitude Group with more than $8 billion of receivables and over five million customers with 70,000 merchants (in Australia and New Zealand).
“At Latitude, even with the Humm business, we will have two million customers who are BNPL and three million customers interest-free instalment customers, which is really where Humm’s and our heartland is,” the companies. Ahmed Fahour told the The Australian after announcing the (proposed) deal.
In the US and in line with research from Morgan Stanley, Citi said Afterpay website visits had declined year-on-year in December for the first time. On a month-on-month basis, they were down 15 per cent.
Other equites analysts have already warned that the BNPL sector is facing significant headwinds not only from regulators but from investors who have exited the sector.
In a note to clients sent last week, Morgans analyst Richard Coles said strong financial results for the first half of the financial year were needed to reverse the slide in investor sentiment and while revenue growth would be strong both Afterpay and Zip were ex[ected to report losses.
‘The sector is suddenly unloved by investor so solid 1H22 results are required to change sentiment” Mr Cole wrote. “We expect strong revenue growth for Afterpay and Zip, but we still expect both stocks to report losses.
Independent expert Lonergan Edwards said declines experienced across the sector, were due to concerns regarding the impact of rising interest rates and news of the latest Covid-19 variant rather than company-specific factors.???
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