The Buy Now Pay Later boom that took off at the pandemic’s beginning is finally fading away. And Aussie finance companies, like BNPL provider Openpay (ASX: OPY), are the worse for it.
Melbourne-based FinTech company Openpay has surrendered control of its assets, operations and trading activities to partners of insolvency specialists McGrathNicol: Barry Kogan, Jonathan Henry and Rob Smith. The trio were appointed Joint and Several Receivers and Managers of the Company on February 4, following the security held by OP Fiduciary Pty Ltd. They were also appointed Joint and Several Receivers and Managers of its subsidiary Openpay SPV Pty Ltd and certain assets of Openpay Pty Limited by Amal Security Services Pty Limited.
Kogan, Henry and Smith will focus on developing a business strategy to revive the Company. Until then, its platform will remain shut. Existing customers will need to complete their ongoing or pending payments, though.
The optimism of a potentially profitable business strategy is dampened by the resignation of one of Openpay’s founders and directors Yaniv Meydan. He has resigned as a non-executive director, effective 4 February 2023.
Openpay was founded in 2013 by Meydan, Marni Meydan and Richard Broome. It works with merchants to give customers the option to buy now, pay later—or, as the Company says, pay “smarter”. It lets people pay up to 20k over two years. Openpay’s strategy worked well for a few years until the BNPL wave flattened.
In Q2 FY23, the Company burnt $18.2 million in cash, with merchant payments of approx $135 million exceeding customer receipts of about $130 million. On the heels of its quarterly report published in January 2023, CEO Dion Appel did not seem too fazed by its financials. He said, “While credit performance has softened, it has done so when compared to the pandemic era, where government stimulus was high, and Openpay prudently did not relax its underwriting rules.” He was optimistic that the Company was going to be just fine.
However, the Company has been accumulating losses for a while now. In FY22, it reported losses worth over $82.4 million. It has been collecting bad debt due to customers’ payment delays and growing merchant payments. And it’s not the only Company to witness this.
The BNPL market is riddled with bad debt due to a lack of background credit checks and regulations. Such platforms attract people incapable of paying the money back. They’re like that friend who promises to pay you back for lunch but never does, and then two years later, they forget about it, and you feel too embarrassed to ask. And you end up paying the price for it, literally.
When the BNPL buzz began, Openpay raised $50 million in an IPO, with $1.60 per share but now languishing at $0.195 where they will remain suspended until further notice.
Alinda is a Business Reporter for The Sentiment
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