BASINGSTOKE, U.K.–Look for a shakeout in the number of companies that offer buy now, pay later (BNPL) solutions, according to a new analysis.
“Major buy now pay later (BNPL) providers have been unable to make a profit over the last few years as the current model of the BNPL industry is not sustainable and the current economic conditions are likely to make it more difficult for BNPL providers, which is contributing to providers’ valuations shrinking,” GlobalData forecast in a new report.
The company added, however, that the decreasing valuations are also offering good opportunities for BNPL acquisitions.
GlobalData noted rising inflation and interest rates have caused the value of BNPL stocks to drop in the past month. As of July 13, 2022, Affirm’s stock is trading at $21.20—a drop from $164.23 in October, according to MarketWatch. Sezzle and Zip also saw their share prices drop to $0.20 and $0.53, respectively. Further, within one year, Klarna’s valuation went from $46 billion to now being worth $6.7 billion, GlobalData added.
An ‘Odd Position’
“BNPL companies are in an odd position. They’re offering services that help customers afford more expensive items in times of economic hardship, becoming increasingly popular in the meantime, yet those same economic conditions are making margins far too tight,” Chris Dinga, payments analyst at GlobalData. “This is perhaps the perfect time for companies looking to offer a BNPL option to invest. A good example is Klarna, which was too expensive to acquire a year ago, but would now be a good investment for any company that would like to offer a BNPL service.”
GlobalData added that BNPL investors will not be willing to continue to invest in companies that are only focusing on growth and not profits. In the long-term, those companies would have to introduce fees or charge interest in order to keep operating.
A ‘Great Opportunity’
“The lack of profits in the BNPL sector needn’t be a huge concern for prospective companies,” Dinga continued. “Those looking to make a BNPL acquisition would not necessarily need to make profit from a BNPL service, they would just be increasing the types of payment available to customers and merchants. For example, this is a great opportunity for credit card providers to acquire not only BNPL solutions but also acquire new technology that they can integrate into their ecosystem to improve their customers’ experience.
“Part of the whole appeal of BNPL has been the convenience those platforms provide to consumers. In the coming months, we should expect to see some acquisitions happening in the BNPL space and further decreases in valuations.”
The Very Best in CU Reporting. For You. For Free. Or Your Money Back
Don’t forget to check your Spam/Junk email folder if you haven’t been receiving your free, popular and daily CUToday.info news headlines.
And if you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time.
CUToday.info has received very positive response from readers following the move to an improved provider of the daily headlines, but many also noted they did need to go to their Spam/Junk folder and mark it as safe.
The new email solution has not only improved every reader’s delivery experience, but it also features a fresh, new format that is easy to read, especially on mobile devices.
Please note and/or make your IT department or email administrator aware the emails will be coming from the domains CUTodayinfo.com and CUTodayinfoReply.com.