Grant Halverson: Was the buy now pay later fintech revolution ever much more than smoke and mirrors?
Economy Watch
English - March 04, 2023 18:00 - 28 minutes - 25.7 MBInvesting Business investment business finance currency economy shares investing new zealand Homepage Download Apple Podcasts Google Podcasts Overcast Castro Pocket Casts RSS feed
Just a couple of years ago there was huge excitement about buy now pay later (BNPL) companies. Via smartphone applications, or apps, their buy now and pay over installments service0 was drawing in consumers and worrying banks.
The high water mark saw US payments company Square, now Block, strike a US$29 billion deal to acquire Australian BNPL service provider Afterpay in August 2021.
But 18 months on the picture is very different with several BNPL companies in serious difficulties or shutting up shop. Latitude Financial Services has just announced its pulling the plug on Genoapay, its BNPL service. Openpay went into receivership, Humm pulled out of the New Zealand market and NZ company Laybuy has delisted from the Australian Stock Exchange.
So what has gone wrong with the BNPL sector? And did its substance ever really match the hype swirling around it?
To discuss this we spoke with Melbourne-based Grant Halverson, CEO of retail banking and payments consultancy McLean Roche, in the latest episode of interest.co.nz's Of Interest podcast.
Halverson notes that BNPL services, in one form or another, have been around for centuries. The new twist was putting an app on a phone. He notes the sector, which both the NZ and Australian governments are moving to regulate, currently offers unregulated credit.
A long time critic of the sector, Halverson describes it as: "Worse than payday lenders in terms of what they're doing, but they do it with an image that doesn't actually hold scrutiny."
Whilst supporting moves to regulate BNPL services, Halverson suggests many of the companies won't be around for much longer as the rising interest rate environment has dramatically increased their funding costs.
'I think it [the future] is very dismal. I think unless they can be bought by somebody most of them [ BNPL companies] will have disappeared by the end of this year. They're all in trouble, they're all in deep trouble," says Halverson.