“There has been a tremendous reset of expectations and valuations and there are some natural repercussions for that,” said Luca Bocchio, a partner at venture capital firm Accel who specialises in fintech.
“Some of the big names are quickly adapting themselves and expanding their product remit so that they can provide services across market cycles.”
Buy now, pay later reset
The burgeoning buy now, pay later industry is perhaps facing the biggest challenge from a higher rate environment. These companies began by allowing customers to spread purchases over three or four instalments with no interest, meaning they depend on fees paid instead by retailers.
But with borrowing rates rising sharply this year, companies in this sector are looking for ways to pass on their higher debt costs.
“This is something we are looking into – it has to be part of the conversation,” said Gil Danziger, co-founder and chief technology officer at Mondu, a buy now, pay later platform for businesses. “The world is changing, and we have to change with it.”
To be sure, some fintechs are broadening their horizons in the opposite direction. Revolut, which is attempting to become a financial “super-app,” introduced a buy now, pay later product in Ireland this year. It’s also planning to launch some form of faster mortgage process, boss Nik Storonsky said in November, while remaining committed to its crypto business, which has cratered along with the value of digital currencies this year.
Klarna, once Europe’s most valuable tech unicorn and the face of buy now, pay later, has been exploring a few different products such as price comparison tools. It also announced a technology partnership with small business lender Krea in October, though Klarna has said it’s providing open banking services and not lending to businesses directly.
Business loans are an area of growth for payments firms such as Stripe and Adyen, which already have relationships with small companies through their merchant platforms. Adyen was granted a banking licence in Europe in 2017 and in the US last year that will help it expand in this area. The Amsterdam-based fintech is also investing “heavily” in unified commerce and platforms, which will see Adyen launch its own terminal range for retailers.
“Obtaining a licence is a hell of an investment, but in return we gain full control over the technology involved, and remove dependencies on third parties,” said Hemmo Bosscher, who leads platforms and financial services at Adyen.
“Small business lending is a tremendously underserved segment that has been left behind by banks, and we can use technology to give out prequalified loans and eliminate human error.”
Bloomberg
