AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Highlights
Many ASX-listed buy-now-pay-later (BNPL) stocks shed over 90% in FY22.
The ASX 200 plummeted nearly 10% during the given financial year.
BNPL stocks were weighed down by the rise in competition in the sector and a series of interest rate hikes.
Buy-now-pay-later (BNPL) shares were among the most affected shares in FY22, with many market leaders shedding over 90% of their value during the fiscal. On the other hand, the Australian benchmark ASX 200 index plummeted nearly 10% during the financial year 2022.
There were several factors which negatively impacted the ASX BNPL players including an increase in competition in the sector and a series of interest rate hikes amid rising inflation.
Growing competition
As already mentioned, the financial year 2022 saw a sharp growth in competition in the BNPL sector. In February 2022, BNPL giant Afterpay left the ASX after it was snapped up by Square’s parent Block in a deal worth US$39 billion in what was considered to be the biggest ever takeover on the ASX.
Then followed Zip with an offer to snap up Sezzle in an all-scrip acquisition. However, the deal has now been terminated.
In other major developments, Commonwealth Bank of Australia (ASX:CBA) launched StepPay while National Australia Bank (ASX:NAB) announced a similar product in May.
Not only domestic players launched new products, but global giants such as Apple also entered the fray with Apple Pay Later, heating up the competition in the BNPL space.
Interest rate hikes
The Reserve Bank of Australia (RBA) followed in the steps of the US Federal Reserve after Australia’s inflation climbed sharply. In FY22, the inflation rate rose to over 5%.
Generally, tech stocks face more pressure with rise in inflation as it leads to higher bond yields. The rise in yields make the future earnings of tech firms appear less attractive. As a result, investors substitute tech stocks in their portfolios with value stocks, which are more deeply linked with the economy, inflation, and interest rates.
Meanwhile, both the ASX 200 Information Technology Index (ASX:XIJ) and the ASX All Technology Index (ASX:XTX) have fallen over 30% in the past 12 months.
Additionally, surging inflation has added to the woes of BNPL users, who are now facing difficulties amid rising cost of living. With an increasing number of Australians resorting to BNPL to support their standard of living, it might result in a sharp rise in bad debts.
