Buy Now Pay Later Provider in Receivership

Bay Now pay later providers exploded in popularity during COVID. (panuwat phimpha/ShutterStock)

The buy now pay later (BNPL) market in New Zealand and Australia has been rocked by the collapse of provider Laybuy which announced that it has been placed into receivership

According to the company’s receivers Deloitte, Laybuy Group Holdings Limited, Laybuy Holdings Limited and Laybuy Australia Pty Ltd suffered a downturn attributed to sluggish sales and the companies had failed to get back into the black after the hey-days of Covid where BNPL grew exponentially.

Founded in 2016 in New Zealand by Gary Rohloff, his wife, and two sons, Laybuy was once valued at AU$358 million (US$240 million).

Mr. Rohloff was also the managing director of online Clothing retailer EziBuy in the early 2000s, along with roles as CEO of Number One shoes and Warehouse stationery.

Via a statement, UK-based Mr. Rohloff said on Monday he was “absolutely heartbroken at today’s decision to request the appointment of receivers to the Laybuy Group.”

“This is a devastating time for the Laybuy team, and I will be doing everything I can to support them as we go through this process.”

Laybuy, like many BNPL providers, allowed consumers to purchase items and pay for them over six weekly interest-free instalments.

It’s a popular alternative to traditional credit methods, particularly among younger consumers who prefer flexible payment options without the high interest rates associated with credit cards.

What Caused the Downturn?

Customers were alerted that something was amiss when the Laybuy platform was inaccessible late last week, displaying an error message that said the site was undergoing maintenance.

This was updated on Friday when a notice was posted online that said “Laybuy’s services are currently suspended, including all payment options,” before adding “We don’t currently have a resolution timeframe but will ensure you are immediately notified. Thank you for your patience.”

Mr. Rohloff said after a long period of consolidation aimed at returning the company to the black, a new buyer was sought, but that failed to materialise.

He blamed Laybuy’s economic woes on the cost-of-living crisis, leading to customers falling behind on payments and increased fraud.

These factors, coupled with a change in consumer attitude towards the platform, have fueled a shift towards cheap products from Chinese-based e-commerce platforms like Temu and Shein.

“We had been working incredibly hard to execute a plan to achieve profitability after years of rapid growth,” Mr. Rohloff said.

“While we have been making good progress over the last two years, the economic downturn has been longer than we expected and this has had a significant impact on the retail sector in both New Zealand and the United Kingdom.”

“This, alongside increased financing costs, created a perfect storm that was difficult to recover from.”

The saleability of the Australian arm of Laybuy was also affected by increased compliance via an amendment to the Credit Act, which was announced recently by the federal government.

The amendment introduces new legislation to align with other credit providers and bring consistency to the lending framework after concerns were raised over consumer safeguards.

Laybuy is not the first BNPL to suffer a loss of market capitalisation. In 2022, Australian BNPL provider Zip Pay pulled out of a $491 million merger with U.S-based lender Sezzle citing unfavourable macroeconomic and market conditions.

In the same year, Australian BNPL market leader Afterpay was sold to U.S-owned Fintech Block Inc. and was written down to half of its sale price by the end of the year.

Affect On Customers

In a statement, Deloitte said a new buyer was being sought while LayBuy is in administration.

“The receivers are working with the directors to explore options as to whether a sale of the business can be achieved so that Laybuy can recommence enabling new transactions,” it said.

“The receivers are working with the companies’ employees, merchants, and other affected stakeholders to assess the financial position of the companies and ascertain the way forward.”

The platform is now suspended, and any new transactions will not be accepted. The receivers advised that affected customers who are currently paying off debt should continue to make their payments as normal.

Laybuy also operates in the United Kingdom, but the receiver’s statement outlined that the business group was unaffected by the closure in Australasia.

“For the sake of clarity, the UK-based entities and certain other entities in the Laybuy Group are not in receivership,” Deloitte said.