Buy now pay later businesses are expected to have taken a hit from lower retail sales in lockdown.
Buy now pay later businesses are expected to have taken a hit from lower retail sales in lockdown.
A Kiwi buy now pay, later business will delay its plans to raise capital and list on the Australian Stock Exchange as the sector takes a hit from retailers closed under lockdown.
Laybuy, co-founded by managing director Gary Rohloff in late 2016, was planning to list on the ASX byJune but has now pushed that back to the end of the year.
The company was understood to be looking to raise north of A$45 million in an initial public offer that would value the company at about A$200m.
Buy now pay, later schemes such as Laybuy work by signing up merchants including retailers and others who provide services to the public such as dental care.
Customers can then use the payment service to spread the cost of the item, or items, they buy over a number of payments. The consumer gets the item up-front, without paying interest.
In New Zealand the biggest player is Australian company Afterpay which spreads payments over four fortnightly payments, while Laybuy spreads it over six weekly payments.
Greg Harford, chief executive of Retail New Zealand, said retailers had made almost no sales during lockdown apart from those considered essential services.
"That will obviously flow through to buy now, pay later schemes. Sales will have dried up. It will be tough going for them."
He said the schemes worked on taking a percentage cut of each sale. "So they will have seen revenues drying up quite substantially."
And he predicted retailers would continue to do it tough over the next few months, with restrictions remaining in place and households facing substantial financial pressure.
But Harford said that pressure could also help buy now, pay later (BNPL) schemes.
"We could see more people want to use BNPL if it helps spread payments." He said for consumers who didn't want to use credit cards, it was still an attractive way to pay for items.
Greg Harford, chief executive of Retail New Zealand. Photo / file.
Harford said retailers would be under pressure to keep their costs down but would likely continue to use the payment schemes if they generated extra sales.
"I would be surprise if too many turned it off in the short term because I would expect strong customer demand for them."
Rohloff said there was an initial drop-off in sales directly after lockdown began.
"However we have seen a marked increase in consumers shopping online."
He said the businesses were looking at every opportunity to support retailers.
Laybuy's bid to list on the ASX won't have been helped by the recent performance of rival Afterpay's share price.
On February 19 Afterpay shares hit a high of A$40.50 before plunging to just A$8.90 on March 23. The stock has recovered somewhat since then to around A$27.
The share plunge came amid investor concern that there would be a decline in consumer spending and worries about how the new payment schemes will ride through an economic downturn which could see thousands of people lose their jobs and unable to make payments.
In an update to the market on April 14, Afterpay said across Australia and New Zealand it saw a marked uptick in online sales in the second half of March while in-store sales volumes were down 29 per cent on the first half of March, resulting in underlying sales in Australasia being down 2 per cent.
New merchants were continuing to come on board at volumes in line with pre-Covid-19 levels and it was "proactively developing initiatives to add increasing value to our merchants throughout this period and identifying opportunities to support merchants experiencing difficulties."
Afterpay also noted there was an increase in hardship claimsunderlying in mid-March but these were now trending down and overall levels remained "within manageable portfolio parameters".
"We have not experienced a material deterioration in loss performance indicators YTD [year to date], however it is still early days.
"Early indicators demonstrate favourable payment trends for orders placed after mid-March, potentially resulting from a shift to more responsible spending by customers, the impact of pre-emptive adjustments to risk settings and the introduction of government stimulus initiatives."
Afterpay doesn't break out New Zealand separately in any of its figures.
But in a response to questions asked by the Herald today about where it saw the business heading in New Zealand after the move to alert level 3, an Afterpay spokeswoman said: "We are making a point of prioritising the needs of our customers and retail partners through what are challenging times for us all.
"Our business model and strong balance sheet means we are well positioned to respond and adapt through this period.
"We are confident that our customer-centric model, which encourages budgeting and responsible spending, will be even more relevant in a post COVID-19 environment."
