BNPL – Australian Shares Continue to Tank Down 83%

Australia BNPL shares keep falling – Zip down 70% from 2021 peak

Australia has 11 ASX listed BNPL stocks -?rest of the world has four combined!!

Zip shares Monday closed $4.36 down 70% from its 2021 peak of $14.53.

If you invested $1000 invested in Zip at its February 2021 peak that was 68 shares, less brokerage - today those 68 shares are worth $298 - a loss from the peak of $702

Australia Leads the World in BNPL stocks……

Australian BNPL stocks peaked in February 2021 - since then it’s been a downward spiral - the decline speed up in the last four weeks.

BNPL Stock Declines 6th December from peaks in 2021 unless highlighted

Zip?- down 70%

Sezzle*?- down 73%

Zebit*?– down 76%

OpenPay?- down 80% (peak Aug 2020)

Douugh?– down 81%

Payright?- down 82%

Humm?- down 84% (peak Oct 2013)

Splitit*?– down 87% (peak Aug 2020)

Fatfish*?– down 88%

Laybuy?- down 90%

IOUpay*?– down 97% (peak Dec 2002)

*BNPL stocks only listed on ASX – don’t operate in Australia

?Sezzle is typical of the BNPL share decline -

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Diane Smith-Gander steers Zip through the correction

AFR Myriam Robin REAR WINDOW Columnist?Dec 5, 2021

?When?Diane Smith-Gander?took over the Zip Co chairmanship (from Melbourne silk?Phil Crutchfield) on February 1, she must have thought her stars had aligned.

Zip’s share price would in the following two weeks double to an all-time high of $14.53. Alas, it would then begin a long, slow decline.

It closed on Friday at $4.83, down 66.7 per cent from its peak and 36.9 per cent below where it was on the day she assumed her position.

With Afterpay soon to be subsumed into?Jack Dorsey’s Block (until Friday known as Square),?Larry Diamond’s Zip will soon become the leading buy now, pay later stock on the Australian sharemarket. It’s a crowded field, though.

As veteran payments analyst (and vehement pay later sceptic)?Grant Halverson?has?pointed out, this country has no fewer than 11 buy now, pay later providers listed on the ASX. The rest of the world’s bourses have a mere four! Which is one less than the number of buy now, pay later outfits listed on the ASX that don’t even operate in this country.

?But in a world of rising inflation and interest rates, the Australian investment community’s seemingly boundless enthusiasm for anything that looks like the next Afterpay has dimmed.

Humm (the old FlexiGroup) is down 43.5 per cent from its February peak. Openpay is down 69.7 per cent. US-based (though ASX-listed) Splitit is off 83.1 per cent, and even Afterpay closed at $98.24 on Friday, some 35.4 per cent below its highs and well below the $124-a-pop valuation reached with Square for months ago (it fell?6 per cent on Thursday?after a shareholder meeting to approve a scheme of arrangement was postponed because of a delay securing approval from the Bank of Spain).

While a sectoral reckoning to something approaching normal valuations was long overdue, and Zip’s share price is merely back to where it was early last year, it’s never fun (and always much harder) to oversee the correction. Smith-Gander must now be ruing her timing. Of course, after paying a toppy $39 billion (in scrip) for the cream of the crop, Dorsey must be doing the same.

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Where is the Christmas cheer for the Zip share price?

Zip shares are not having a strong start to the festive season.

Motley Fool Tristan Harrison?December 5 2021

The?Zip Co Ltd?share price is not having a strong start to the festive season.

In the first few days of the month, Zip has dropped more than 6%. Over the past month the Zip share price has plunged 22%.

In-fact, it has been a steady decline for Zip since 20 October 2021 – it has fallen by 32%.

What’s happening to the Zip share price?

After hitting a high of almost $14 earlier this year, it has dropped by more than two thirds.

The business has continued to report growth. Only sellers would know why they are accepting a much lower price than earlier this year.

Some brokers are seeing some negative impacts for Zip.

For example,?Macquarie Group Ltd?(ASX: MQG)?analysts note that both US and Australian growth rates were slowing down, with the US possibly affected by Zip rebranding from Quadpay to Zip. The three months to 31 December 2021 will be telling for ongoing growth considering it includes the important trading periods like Christmas, Black Friday and Cyber Monday.

UBS referred to the recent?Payments System Board?comments on buy now, pay later surcharges. The board said:

The Board has also concluded that it would be in the public interest for ‘buy now, pay later’ providers to remove their no-surcharge rules, consistent with the Board’s longstanding position on such rules. Given the complexity of the regulatory issues, the Bank will continue engaging with the Treasury on regulatory approaches.

The broker thinks this is a bad thing for the Zip share price.

Recent growth

Despite those negatives, Zip does continue to report a high level of growth.

For the?three months to September 2021, quarterly revenue grew 89% year on year to $136.8 million on the back of transaction volume growth of 101% year on year to $1.9 billion.

Customer numbers grew 82% to 8 million and merchants on the platform jumped 71% to 55,200.

The business continues to seek international growth through acquisitions. One of its latest moves is expansion into India with an investment in ZestMoney.

ZestMoney is one of the largest and fastest growing buy now, pay later platforms in India with more than 11 million registered users, more than 10,000 online merchants and a presence in 75,000 physical stores.

Zip also reported that in Australia its arrears went from 0.91% at 30 September 2020 to 1.87% at 30 September 2021.

As well as India, it’s now looking to expand in Mexico, Canada and the Middle East.

Is the Zip share price good value?

Both Macquarie and UBS rate Zip as a sell. But the Zip share price has fallen so much that their price targets of $5.70 and $5.40 are both more than 10% higher than where it is now.

Other broker price targets from different price targets imply a high level of potential growth. For example, Morgans has a price target of $8.56, which is more than 70% higher than today.

BNPL companies manage hardship badly

BANKING DAY ??John Kavanagh ?06 December 2021

Financial Counselling Australia has renewed its call for regulation of the buy now pay later sector, after a survey of its members revealed BNPL debt is a growing contributor to household financial stress.

Eighty-four per cent of financial counsellors surveyed said that half, most or all clients had BNPL debt. This compared with 31 per cent a year ago.

Sixty-one per cent of counsellors said most or all clients with BNPL debt are struggling to pay other living expenses, with many clients prioritising BNPL repayments over other essential expenses.

The report said: “BNPL companies are falling short in their handling and support of customers in hardship. Accessing BNPL credit is frictionless at the start of the customer journey but many clients and their advocates face significant challenges when trying to negotiate hardship arrangements.”

Asked to rate the hardship practices of BNPL providers that are members of the Australian Finance Industry Association’s BNPL Code of Practice, counsellors gave Afterpay 5.9 out of 10, Zip 5.5, Latitude Pay 5.2 and Humm 4.7.

Counsellors reported that companies were hard to contact and communicate with and were not responsive to the needs of clients. There were instances of company representatives not understanding financial hardship, being judgmental or not responding appropriately to family violence.

“These ratings overall indicate the industry has a long way to go,” the report said.

Feedback from counsellors was that the absence of a legal requirement to undertake affordability assessments and credit checks makes it too easy to access BNPL, and people are becoming overcommitted with multiple BNPL accounts.

One practice that concerned counsellors is providers automatically increasing a customer’s limit based on repayment history – a potential cause of over-commitment.

“This is reminiscent of practices in the credit card industry that were banned,” the report said.

Counsellors also reported that BNPL is being used to pay for essentials, such as groceries, medication and utility bills, and that users can be trapped in a debt cycle.

“BNPL is credit and, like other credit products, should be regulated under the National Credit Code. We are calling on the Australian Government to commission an independent review of the existing legal framework, with a view to developing a fit-for-purpose regulatory response that will make BNPL safer for all users.”

FCA said the emergence of wage advance products, whose providers exploit the same gap in regulation, risks causing further harm.

Beware the buy now, pay later 'debt spiral'. Experts warn it'll be haunting us long after Christmas

ABC By business reporter?Rhiana Whitson

?Are you using buy now, pay later (BNPL) services to buy your Christmas gifts this year?

You could be in a for a bad debt hangover, financial counsellors warn.

In its annual survey, Financial Counselling Australia?(FCA) found a sharp increase in people with bad BNPL debt seeking help from financial counsellors in the past 12 months.

Some of the?more popular BNPL companies include Afterpay, Zip Pay, Latitude and Sezzle.

Eighty-four?per cent of financial counsellors said?that about half, most or all clients had BNPL debt at the time of the survey.

That's compared to 31 per cent just a year ago.

And 61 per cent of those surveyed said most or all clients with BNPL debt were struggling to pay other living expenses.

"We're hearing from people who have up to nine?different buy now, pay later products across a number of different companies. And it's just getting unaffordable for them to pay," says Deb Shroot, a financial counsellor with the National Debt Helpline.

"Usually, these products are also on top of a credit card, personal loan, maybe a couple of utility bills or rent.

"It's just putting people into a debt spiral."

Meet Jackie, who needed to fix her teeth

Jackie first started using buy now, pay later to pay for things like good quality bed linen and presents for others.

The disability pensioner missed a couple of payments and was hit with $18 late fees.

But it was a trip to the dental clinic -?which offered BNPL as a payment option -- that landed her in serious financial trouble.

"The private dentist said to me, 'You need a couple of crowns and you need a plate or basically you're not going to have any teeth,' and they gave me a quote for $4,200," she says.

When Jackie said she could not afford the dental bill, she was told the dental clinic offered BNPL as a payment option with a company she had an account with.

Although she had initially been asked to provide a Centrelink income statement when she signed up with the BNPL company, she was able to increase her spend limit without any further checks.

A slippery slope

Jackie soon realised she could not afford the repayments and over about six months she racked up around $2,500 in late fees.

"I just clicked on the app and the money was there. You're stuck with the repayment plan," she says now.

"At one stage, they [the BNPL plan] took the money out and I didn't have money for food."

Buy now, pay later products are increasingly being used to pay for everyday items such as groceries, medical and vet bills —?or simply buying a beer at the pub.

These days, you can even?use BNPL to pay for large recurring expenses like childcare.

And anyone can rack up a bill. It can be devastating for those who haven't got the capacity to juggle the debts with everything else going on in their lives.

"Essentially, you're having people who are drunk and cognitively impaired, able to take out a credit purchase and make a credit decision," says Deb Shroot.

So, what help is out there?

If people are struggling, they're supposed to be able to access a hardship program so they can work out a new payment plan.?

However, FCA's survey found BNPL hardship practices were falling short.

Financial counsellors ranked Humm's hardship practice the worst, at?4.7 out of 10. Zip scored 5.5 and LatitudePay got 5.2.

Meanwhile, Afterpay's hardship program was ranked the best,?but it still only scored 5.9 out of 10.

In comparison, the major banks score about 7 out of 10 in FCA surveys.

Jackie agrees that BNPL hardship policies need to be improved.

Although her repayments were switched from weekly to fortnightly, when she needed to make further changes she says the company did not respond to her phone calls or emails.

It was not until she got help from a financial counsellor through the National Debt Helpline that her debt was put on hold for three months while her complaint was?reviewed.

"It's not like I don't want to pay it, I just need to pay it as I can and in smaller sums because otherwise I won't have anything. I am looking around for things to sell so I can pay a debt. It's really hard, it's embarrassing," she says.

BNPL 'out of control'

A whopping 95 per cent of financial counsellors say BNPL needs to be regulated to protect consumers, and should be covered by the National Credit Code (NCC).

Deb says BNPL services charge fees instead of interest and so are not regulated by the NCC, which covers credit cards, mortgages, personal loans, payday loans and consumer leases.

Instead, BNPL providers Afterpay, Brighte, Humm Group, Klarna, Latitude, Openpay, Payright and Zip Co are signatories of a voluntary industry code of practice.

?"For this reason if things go wrong, you're at the mercy of the company, there is no recourse for correction, there is no ombudsman to complain to, you just simply don't have the same protections that you would have when using the other products," Deb says.

Fiona Guthrie, CEO of Financial Counselling Australia, says Australia needs to conduct a specific and independent review of the law and develop fit-for-purpose regulation under the National Credit Code.

"We need to have safeguards around this product, too many people are being harmed," Fiona says.

"Because when you think about it, you can get by now, pay later from just a couple of hundred dollars?all the way up to $30,000. And on?expenses from shoes to fashion to solar panels, it's just out of control."

Buy now, pay later defends hardship programs

Zip Co says it does credit checks on every customer, and 1 per cent of them have missed payments. It has 500 customers on its hardship programs from 2.6 million customers.

Humm says 1 per cent of its customers applied for financial hardship support?and the company makes it easy to apply for them to apply for help.?

“Our credit-decisioning algorithm ensures that we only accept customers who can repay their accounts, but we understand that circumstances can change," it said in a statement.

Afterpay says?96 per cent of?payments on its platform are made on time, and customers are?suspended from the service if they make a late payment.

Christmas concerns

Household debt levels typically surge in the first quarter of the year after people overextend themselves in the Christmas period.

Jackie has a warning for people considering using buy now, pay later services to buy Christmas presents they cannot otherwise afford.

"Just don't. You might look at it like it is just a small repayment, especially if you've got multiple ones. But after Christmas, you're going to be in so much debt and under so much stress," she says.

"I think they?[BNPL companies] are sort of targeting vulnerable people, and coming up to Christmas people are going to be looking at options to buy for Christmas."

For Jackie, her BNPL debt is like a black cloud hanging over her.

"Every day you get up and think, you can't even afford a cup of coffee. It's really, really hard."

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