BNPL – Frenetic Activity Continues…. For How Long?

Key activity in the last 21 days in BNPL.

Facebook launches mobile wallet in USA - direct threat to PayPal and Square/Afterpay.

PayPal discards late fees in all global markets - direct threat to 20% of BNPL app revenues.?

Amazon trials Affirm in USA, limited number of (younger) consumers and only at the payment gateway ?– potential threat to USA BNPL apps if Affirm gets full adoption.

Commonwealth Bank of Australia's StepPay hits the market - initial results appear to be very good, 200,000+ on wait list - CBA have 4 million customers in Australia plus ASB in New Zealand

Afterpay, Klarna and Zip report over $1.1 billion in BIG losses - Zip especially will run out of cash within 7 months - not sure what investment markets expected?

OpenPay - auditors qualify accounts - they are on a knifes edge and will need cash urgently.?

Payright with very bad results with both credit losses and expenses.?

Splitit Losses double and CEO departs.

Sezzle with Credit losses increase, loss widens and doubtful debt provisions double to nearly half revenue.

Suncorp Bank Australia launches Visa BNPL.

Facebook launches ‘Facebook Pay’ in numerous countries - service linked to customers debit/credit card or PayPal – yet another competitor for small transactions.

PayPal buys Japanese BNPL company Paidy US$2.7 billion – buying 6 million users and 700,000 merchants.

Affirm Qt results 7.1 million US users up 34%, revenue US$261.8 million, annualized US$1.05 billion( A$1.3 billion) vs Afterpay full year A$822 million – Afterpay US revenue A$435 million (US$325 million)?

Revolut and Monzo announce plans to launch BNPL - a pure interchange play by these prepaid issuing neo banks - yet another reason to increases losses.

Two very interesting US research pces ask some very relevant questions -

Can the race to bottom on credit quality (or the lack of it) continue?

and

Who is loyal to who...seems consumers prefer merchants over BNPL apps?

Both questions are critical to the long term success of BNPL.

As 'buy now, pay later' surges, a third of U.S. users fall behind on payments

Reuters By?Anna Irrera - Sept 9

?A third of U.S. consumers who used "buy now, pay later" services have fallen behind on one or more payments, and 72% of those said their credit score declined, a new study published by personal finance company Credit Karma showed.

The study, conducted by software firm Qualtrics, surveyed 1,044 adult consumers in the United States last month to measure their interest in buy now pay later (BNPL) and found 44% had used these services before.

The usage figure was slightly up from a similar survey conducted by Credit Karma for Reuters in December, while missed payments was down from 38%.

The latest survey found younger consumers were more likely to miss payments. More than half of Gen Z or millennial respondents-- those born between the early 1980s and mid-to-late 1990s-- said they had missed at least one payment. That compares with 22% of Gen X, who were born in the early 1960s to early 1980s, and 10% of Baby Boomers, those born between the mid-1940s and 1980.

There has been a surge in usage of BNPL services, which allow consumers to easily split payments for purchases into installments. The boom in volumes by providers such as Klarna, Affirm, AfterPay Ltd??and PayPal, has been driven in part by online shopping growth during the coronavirus pandemic.

The explosive growth has led to more dealmaking and competition. Earlier this week PayPal announced it would acquire?Japanese buy now, pay later firm Paidy, while last month rival Square?agreed to acquire AfterPay.

The growth has also led to more scrutiny from regulators who aim to ensure consumers do not take on more debt than they can handle.

"It's easier than ever to purchase an item -- and finance it -- without even thinking about the implications of the purchase," said Colleen McCreary, financial advocate at Credit Karma. "It's this disconnect between making a purchase and actually paying for it where consumers can get in trouble."

Most consumers who used BNPL services said the purchase was for $500 or less, on average. Low-cost purchases were most common among Gen Z, nearly half of which have used BNPL services to pay for expenses of $100 or less, the survey found.

BNPL HAS NO LOYALTY

MacQuarie commissioned consumer US research, the results dispute BNPL’s claims.

?1.6% of consumers say BNPL is their primary method of instore payment.

?3.1% as the primary payment method of online shopping.

Only 9% of active users see BNPL as their primary online payment method - Only 5% of active users see BNPL as primary instore payment,

Loyalty the key driver of consumer payment behaviour is highly questionable according to MacQuarie.

US consumers say they will change payment types rather than change stores and will swap BNPL provides even quicker, this equals a total lack of loyalty.

63% of consumers will use a different payment type e.g. debit card

A whopping 70% say they switch BNPL providers.

MacQuarie’s verdict is brutal the “merchant owns the customer, not the BNPL”. This applies consistently to all BNPL brands and its not good news!

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