Buy now, pay later companies want their money — but they’re finding it harder and harder to collect.

Where’s my money? — every BNPL company

In 2021, Americans spent $20B on BNPL services (SFGATE) — taking a larger share of the $870B U.S. e-commerce industry.

Now, consumers are beginning to see the actual price of BNPL programs, with 43% of Gen-Zs missing a BNPL payment at least once (Piplsay survey). Investors are also realizing the true cost of a BNPL investment:

• Affirm (NASDAQ:AFRM) — is down nearly 90% from its all-time highs.
• Sezzle (ASX:SZL) and Zip (ASX:ZIP) — Australian BNPL firms — are down over 91% from their highs.

In 2021, Block (then Square) acquired BNPL company Afterpay for $29B — a questionable purchase. For the second half of 2021, Afterpay reported a $345M loss compared to a $60M profit forecast — impacted by rising marketing costs and bad debts.

Block lowered Afterpay’s growth expectations from 70% to 25-30% in February. A grim outlook for both the BNPL industry and Affirm — expected to report earnings tomorrow, May 12.

Expect more regulations for the industry

Marisabel Torres, Director of California Policy at the Center for Responsible Lending (SFGATE), is concerned consumers are amassing large debt balances without understanding the terms.

One Afterpay exec even referred to its product as a “budgeting tool.” But according to a 2021 Ascent survey — 45% of U.S. adults used BNPL on a purchase that didn’t fit their budget.

• In the U.K., Klarna — the world’s largest BNPL player — will report BNPL usage to credit agencies, impacting credit ratings.
• The Consumer Financial Protection Bureau started an investigation into BNPL firms over debt accumulation worries in the U.S.

Trouble ahead: 2022 has been difficult for the consumer spending-reliant BNPL industry. Consumer spending has fallen on inflation and recession concerns — with supply chain issues and product shortages a constant problem.

Investors: Future of BNPL

Regulations, lower spending and aversion from unprofitable, high-growth tech stocks continue to drag down BNPL stocks. For Affirm, here’s one path out of its nightmare:

• Byrne Hobart of The Diff sees the possibility for a larger company like Shopify, Amazon or a large financial institution acquiring Affirm.
• Jason Mikula, former Goldman VP — thinks Affirm would make a good acquisition target for Goldman and its consumer division, Marcus.

The alternative: Grind it out. Affirm’s CEO Max Levchin has experience surviving the dot-com bubble as PayPal’s CTO. Hobart believes this makes him the right person to carry Affirm through a downturn.