Buy now pay later provider Laybuy reports rise in fraud, predicts lower revenue growth

Laybuy managing director Gary Rohloff. Photo / Jason Oxenham

New Zealand buy now pay later operator Laybuy has been hit by a rise in fraud and credit losses in its UK business and is forecasting lower-than-predicted revenue growth this financial year.

Launched in 2017 by retail veteran Gary Rohloff, Laybuy has focused on expanding in the UK while maintaining its presence in its home markets of New Zealand and Australia, where it is listed on the ASX.

But in an update to the market today, managing director Rohloff said, consistent with other buy now pay later participants, it had experienced "prolonged elevated credit and fraud losses" in the UK this year resulting in a negative net transaction margin (NTM) for January and February.

The margin remained positive for its Australian and New Zealand businesses but the overall margin for its fourth quarter was expected to be negative and lower than break-even reported for the third quarter.

"As has been widely reported, fraudulent activity, which is a key driver of credit defaults, has increased globally in recent months and this has impacted those involved in e-commerce, including the BNPL sector in which Laybuy operates.

"Management continues to take a proactive approach to reducing fraudulent activity on Laybuy's payment platform, including deactivation of merchants attracting high levels of fraud and strengthening the fraud and credit decision process on new customer sign-up."

Rohloff said it had also recently appointed a chief risk officer who would be responsible for leading Laybuy's fraud and credit loss prevention strategy.

The company also forecast lower revenue growth than it had previously, predicting revenue to grow by between 43 per cent and 48 per cent for FY22. Its earlier guidance was 60 to 70 per cent growth.

In FY2021, Laybuy reported revenue of $32.6 million, up from $13.7m in the prior financial year. But losses widened from $16.1m in FY20 to $41.3m in FY21.

Rohloff said the number of merchants signed up to use the service had grown, and gross merchandise value continued to rise, but merchant commission had declined slightly because its app-exclusive partnership contributed a greater share of the growth.

Laybuy reported its growth merchandise value was up 25 per cent year on year for January and February, with the UK market particularly strong - rising 38 per cent year on year for those two months.

Rohloff said it had added more than 175,000 active customers and 4200 active merchants since April last year and now had a total of 930,000 customers and 13,400 merchants.

"Our focus at Laybuy is on prioritising measures to achieve profitable growth. The UK remains an important growth market for our business, while we continue to focus on growing our profitable operations in ANZ [Australia and New Zealand]."

Shares in the company had fallen A0.002c to A8 cents per share by 2.30pm NZ time. The company listed in September 2020 with an initial public offer price of AU$1.41. Its shares rallied more than 50 per cent on debut but have steadily fallen since February last year.