Group items tagged

The UK Financial Conduct Authority (FCA) is cracking down on potentially unfair and unclear terms in the contracts of Clearpay, Klarna, Laybuy and Openpay ahead of up-and-coming regulation of buy now, pay later (BNPL) market. All four firms agreed to amend their terms to address the concerns, and some will refund consumers who have been inappropriately charged fixed late payment fees for instalments that were due after they cancelled their entire online sales purchase with the retailer.

Despite phenomenal growth, current buy now, pay later (BNPL) models are showing to be rather unprofitable. Quinlan and Associates estimates that in Asia-Pacific (APAC), the largest BNPL firms, including Australia's Afterpay and Japan's Paidy, are currently running average profit margins of -15% per annum (p.a.), while the more nascent players operating in emerging markets like the Philippines' Cashalo and Indonesia's Akulaku are suffering from profit margins of -100% p.a. According to the analysis, APAC BNPL providers are struggling to reach profitability as costs relating to sales, marketing, funding, staff, technology, and credit losses eat into all their profits. Losses are even more pronounced for emerging market BNPL providers because of their stronger focus on long tail, unbanked/underbanked consumers, leading to much larger credit losses and funding costs. Quinlan and Associates identified three key pathways for them to become commercially viable: optimization, vertical integration and expansion.