BNPL sours in Australia, but will SEA players buck the trend?

Buy now, pay later (BNPL) hit Southeast Asia in full force in early 2021. As the trend grew, it became impossible to ignore.

BNPL firms found their spots alongside Visa and Mastercard at checkout counters as consumers lapped up the service’s easy and near-instant approvals. Venture capital firms poured fuel into the trend.

Across the Indian Ocean, the sentiments toward BNPL have grown more somber.

In February 2021, the service hit a fever pitch in Australia, one of the most mature BNPL markets worldwide. The country has more publicly listed BNPL firms than anywhere else in the world.

Ecommerce was thriving as the Covid-19 pandemic accelerated a shift toward online shopping, providing a “one-off big lift” to BNPL firms, Pranav Gundlapalle, an analyst at Sanford C Bernstein covering Pan-Asian banks and fintech firms, tells Tech in Asia.

Generous stimulus packages dished out to households in the US, the largest market of Australia’s leading BNPL firm Afterpay, helped fan the flames.

The exuberance has been short-lived. Less than a year on, confidence in Australian BNPL firms is waning – if share prices are any indication – and prices may have yet hit bottom.

The decline has been swift. Since their February highs, shares in Afterpay and its rivals – including Zip, Splitit, Openpay, and Fatfish Group – have lost between 50% and 90% of their value on the public market.

This is partly driven by concerns about the model’s defensibility amid high competition and fears that last year’s ecommerce boom may not be sustained.

And with BNPL firms facing more scrutiny from regulators worldwide, Gundlapalle expects downward pressures to persist, especially for standalone players that offer a single product.

“I would say you don’t have a lot of positive catalysts for this space in the medium term,” he warns.

A crowded market

The end of pure BNPL

Firms in Southeast Asia will evolve differently