Laybuy has finally admitted defeat, just the latest in a lengthy list of BNPL failures. Founded in 2017, Laybuy raised around $51m through its IPO in August 2020 at a valuation of around $230m. It also raised $27m back in 2021 to target the UK market. At the time, Laybuy Managing Director Gary Rohloff told RBI that the firm had already experienced strong growth in the UK.

“This capital raise is an important step for Laybuy. It enables the company to continue its strong momentum and to capitalise on the significant growth opportunity in the UK market. We believe this will maximise shareholder value in the longer term.”

He then told RBI in a video interview in 2021: “We have a path to profitability and the base to continue to grow in our existing markets.” He never found that path.

Last January, Laybuy announced plans to delist from the Australian Securities Exchange (ASX) after its value plummeted.

Laybuy market value dipped by +98%

And then last February, in another video interview with RBI, Rohloff shrugged off the market hammering and said there would be no change in strategy. By April this year, Laybuy’s value on the junior Catalist exchange had dropped to $5.4m and so had lost over 98%. Laybuy was placed on the market but no buyer has emerged. Since then, the valuation dropped below $4m.

On 12 June, Laybuy disabled all of its payment products to users. Laybuy has blamed the economic downturn and a squeeze on the retail sector in New Zealand and the UK for the firm’s collapse. However, the Labuy model never appeared close to being profitable.

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UK customer numbers peaked at around 610,000 in Q1 2022. That number then dropped below 500,000 by the end of the year.

Growing list of BNPL failures

The list of BNPL failures continues to grow. Earlier this month, Art Money folded. Art Money raised $10m in equity investment and also secured $100m debt finance for art purchases but was unable to persuade backers to continue funding a loss-making model.

Australian-based BizPay collapsed into receivership last November. ZestMoney, which claimed to be the largest and fastest growing consumer lending fintech company in India was another BNPL outfit to fail, last December.

Indeed, 2023 was a notably disastrous year for standalone outfits. Affirm exited the Australian market, IOUpay failed, Latitude Financial Services exited BNPL, Openpay failed, Payright, Splitit and Zebit delisted.

ZIP withdrew from India, the Philippines, Turkey, the Czech Republic, South Africa, Poland, Singapore, the UK, Mexico, and the Middle East. The Zip share price is ahead for the year to date by 127% but is down by 87% since it peaked in February 2021.

Other BNPL reverses included shopping and rewards platform ShopBack terminating its BNPL offering, established in the wake of the firm’s acquisition of BNPL hoolah.

Atome launched in Vietnam in April 2022 to much acclaim but within a year, Atome ceased its Vietnam operations. Singapore BNPL firm Pace also opted for voluntary dissolution in August 2023.

Affirm’s share price is down by 33% for the year to date and down by 81% since peaking in 2021. In August 2021, Block announced plans to acquire the perennially loss-making Afterpay for a whopping $29bn. By the time the deal closed, the Block share price had fallen to the extent that the Afterpay acquisition was valued at $13.9bn. Since August 2021, the Block share price has fallen by 75% For the year to date, it is down by just 12%.

On the other hand, Sezzle’s share price has risen four-fold this year in a rare positive market move in the sector.

Regulation holds key to sector survival in US

In May, the Consumer Financial Protection Bureau finally moved against the BNPL sector in a long forecast regulatory intervention.

Specifically, the CFPB ruled that BNPL users merit the kind of consumer protection enjoyed by credit cardholders.

Erin Bryan, one of the US’ top financial experts from international law firm Dorsey & Whitney told RBI that the BNPL sector has been in the CFPB’s sights for several years.

“The CFPB had made it clear that BNPL users should have many of the same rights and protections as credit card users. Specifically, this means BNPL providers will need to have compliant processes to investigate consumer disputes, refund returned products or cancelled services, and provide periodic statements with fee disclosures.

“The popularity of BNPL products with consumers has skyrocketed in recent years and the CFPB has taken notice. This is just the beginning of the CFPB’s regulation of the BNPL industry,” said Bryan.

UK BNPL regulation: discussion point between government and opposition

Elliot Reader, Senior Vice President at investment bank, Houlihan Lokey, told RBI: “The trajectory of the buy-now-pay-later market will be largely dependent on the level of regulation placed on the sector – a key discussion point between political parties at the moment, and a delicate balancing act between protecting consumers and providing them with access to suitable financial products.

“Whilst there is a recognition that regulation will happen in some form, the format of it will decide whether BNPL in its current form will remain a viable product to offer in the UK. The current delays to regulation continue to create uncertainty for the sector, and when larger banks and institutions are making decisions on where to invest – this uncertainty creates challenges.

“There is no doubt there is a consumer demand to service. However, 25% of UK BNPL users have been charged with late payment fees according to research by the Centre for Financial Capability, which indicates there is a need to either improve underwriting and affordability standards or educate borrowers on the potential implications and consequences of using such a product.

“Fulfilling this consumer demand will remain an opportunity for lenders to be serviced through some form, but until the regulation is understood, it remains to be seen whether or not BNPL will sustain its popularity.”

BNPL in Australia at ‘saturation point’

Grant Halverson, CEO of McLean Roche, said: “BNPL is already at saturation point in Australia with 7 million accounts and 3.8 million users out of a 26 million population.  ZIPs ANZ business has flatlined as has Afterpay while market leader PayPal is also at single digit growth. All these fintech app players now issue credit cards with high fees. So much for the claim BNPL apps would destroy cards. They have had to join the credit card pack to attempt to become profitable, while getting ready for regulations in 2025 which will slow them down and add costs.”