Afterpay hirings plunged – is BNPL slowing down?

It seems like everywhere you can shop online, consumers are encouraged to split their shopping cart total into smaller payments. A robbery, a fancy designer outfit, or new headphones certainly seem less daunting and draining on the $33-a-month bank account.

Every time I meet him, I resist the “buy now and pay later” urge. Especially because I can’t even predict what’s going to happen in three months. But 45 million buyers in the United States are clicking on these enticing online deals to pay for clothes, electronics, household goods, and other items, especially Gen Z and Millennials.

I was born after initial layaway increase, the retail practice of paying for in-store purchases with payments over time. The new types of installment loans are designed to be as easy to get as liking something on Instagram. Research shows that these apps are also effective in encouraging consumers to order items they would otherwise be hesitant to buy.

As a result, competition among these fintech companies, often referred to as BNPL, continues to grow rapidly. Companies have struggled to win customers, increase market share and hire talent. But one major player is showing signs of slowing down.

Australia’s Afterpay is one of the largest and best-known companies offering point-of-sale installment loans to consumers. Last year, the app became a official sponsor of New York Fashion Week and was acquired by payments giant Square for $29 billion. However, data from our parent company, Thinknum Alternative Data, shows that hiring at Afterpay declined significantly in early February this year and is near a year-to-date low.

Hiring growth at Afterpay competitor Klarna has also started to decline since March 24 after a steady increase since July 10, 2020.

Other big “buy now, pay later” companies include Affirm, Klarna and Paypal, but there are also startups with millions of users such as Sezzle, SplitIt, Quadpay and Perpay.

The installment loans offered have simple repayment schedules, annual percentage rates (APR) of 10% to 30%, and often help increase sales. RBC Capital Markets estimated a BNPL option increases retail conversion rates by 20% to 30% and increases average order totals by 30% to 50%. A report estimates that the global volume of BNPL loan transactions will reach $680 billion by 2025.

As a result, Afterpay has expanded to thousands of stores and brands like Petsmart, Ulta Beauty, Bed Bath and Beyond, as well as Target. However, data from Thinknum shows that locations using Afterpay are concentrated in the US, UK, Australia and New Zealand.

A drop in hiring is often a sign of slowing growth, but the BNPL sector is also coming under greater scrutiny and the possibility of increased regulation. Last December, the Consumer Financial Protection Bureau opened investigation. The agency asked Affirm, Afterpay, Klarna, PayPal and Zip to submit information about the benefits and risks of their loans. The investigation was prompted by significant use in the growth of BNPL during the Black Friday and Cyber ​​Monday shopping weekend.

The UK’s Financial Conduct Authority has also raised concerns about the industry by his opinion on the large amounts of debt that Gen Z and millennial buyers were taking on through BNPL loans, and the higher likelihood of missed payments.

Knowing how much more I could pay for my purchases in late fees, and how easily I could rack up thousands of dollars in debt for things I don’t need, deterred me enough from signing up. at BNPL. But I can see the appeal if you don’t already have a credit card, savings, a steady paycheck, or the willingness to pay for a big item in full right away.

The industry expects people like me to eventually give in and join the millions of existing users. It only takes a few clicks. But I’m too worried about what happens next, and more and more government regulators are too.

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