The industry was once hailed as a great invention, but it is now close to breaking point, with millions of Aussies being lost.
The purchasing sector now, the later payment (BNPL) returned to the headlines for all the wrong reasons last week, when the founder of a major BNPL service provider lost most of his fortune of 800 millions of dollars after the shares fell.
Sezzle’s U.S. founder Charlie Youakim was on the rise when Sezzle’s stock was worth $ 9.20, but a few days ago it crashed 96 percent and dropped to just 40 percent.
Now, an expert has warned that the whole industry is on the verge of extinction, as cost-of-living pressures keep Australians away from spontaneous purchases.
Australians can’t afford BNPL services, such as Afterpay, Zip and Humm, because inflation is skyrocketing, meaning many of those who still use these payment systems are people who can’t pay their debts.
To top it off, the Covid-19 stimulus packages have been completed, which provided a brief lifeline for the bad debts that these companies were paying, but no longer.
It comes as the cost-of-living crisis continues to rise, and KFC last week admitted it had used cabbage to fight rising iceberg lettuce costs.
Earlier Monday, reports surfaced that green beans were selling for $ 39.99 / kg at Harris Farm Markets, prompting Australians to be more careful about what they buy and how they buy it.
Andrew Brown, of investment company East72, has long been against the BPNL industry and believes it could soon reach a crisis point.
“The delinquent debt experience is horrible,” he told the Sydney Morning Herald this week.
“The simple fact of life is this: BNPL’s business as a freelancer means you’ll attract a lot of people who aren’t able to get their money back, especially if you don’t have solid credit checks.”
Experts have previously predicted a potential “carnage” for the purchasing sector to now pay later, as suppliers run out of cash, bad debts are shipped and customers withdraw from using the service, a model they say is not sustainable.
The BNPL sector has been bleeding money all year since these companies revealed they were not posting profits.
Many companies in the Buy Now Pay sector have only managed to stay afloat after partnering with larger entities to bear most of their costs.
Afterpay, for example, suffered a $ 39 billion merger last year with U.S.-based Block Inc., led by Twitter founder Jack Dorsey.
In February, Australian loan company Latitude Group merged with another Australian BNPL, Humm, for $ 35 million in cash and $ 150 million worth of Latitude shares worth $ 335 million at the time of the announcement. .
And then there’s the American firm Sezzle which will merge with Zip from Australia during the third quarter of this year.
However, the deal could be in jeopardy after stock prices fell to new lows last week, leaving only $ 35.4 million of its $ 800 million fortune.
Zip, too, is feeling the problems of the industry, with its shares submerged in the last 12 months, currently trading at 63c compared to $ 14.53 in May last year.
Australian BNPL providers are also facing further pain from Finance Services Minister Stephen Jones, who said on Thursday that the sector would be similarly regulated to credit products by mid-2022, a change they have been campaigning for. consumer advocacy groups.
Technological unicorns are fighting in this post-Covid world.
Other industries are not facing a pandemic either, as supply chain problems are sounding dead.
Last month, an Australian grocery technology start-up called Send collapsed, leading to the cancellation of 300 jobs.
The Australian construction industry clings to a thread, with one in two companies estimated to be insolvent.
Last month, two construction companies collapsed just a few days apart.
– With Sarah Sharples