Apologies but it's as best as I can post
BusinessBanking & financeBNPL
Humm’s Abercrombie warns on rising bad debts for former BNPL darlings
Clancy Yeates
By Clancy Yeates
June 1, 2022 — 8.30am
Save
Share
Normal text sizeLarger text sizeVery large text size
The former chairman of consumer lender Humm, Andrew Abercrombie, has warned loan losses in the struggling buy now, pay later sector will worsen, after operators failed to properly assess people borrowing small amounts.
Abercrombie, a 20 per cent shareholder in Humm who is campaigning against its plan to sell its consumer finance business, on Tuesday argued the “fundamental flaw” for many BNPL operators was the way they had assessed customers borrowing a few hundred dollars.
Andrew Abercrombie, a major Humm shareholder.
Andrew Abercrombie, a major Humm shareholder.CREDIT:CRAIG SILLITOE
Humm was previously known as Flexigroup, which has provided instalment loans to customers for more than a decade. Unlike most BNPL firms such as former market darlings Zip and Afterpay (now owned by US fintech Block), Humm is profitable.
The more recent wave of BNPL firms provide instalment loans that are repaid without interest over a short period, whereas Humm has traditionally financed larger consumer expenses, repaid over a longer amount of time.
Advertisement
Abercrombie said that until a couple of years ago Humm would not do a BNPL under $500 because it believed it would attract risky borrowers, and the industry’s move into the lower-value transactions had given rise to its bad debt problems.
RELATED ARTICLE
Diane Smith-Gander says the buy now pay later sector is now focusing on profit margins rather than just customer growth.
BNPL
BNPL sector needs to dig itself out bad debt hole, says Zip chair
“Nothing can change the fundamental flaw with this ultra-small ticket buy now, pay later,” he said.
“You’ve got to do these things super quickly, and super accurately,” Abercrombie said. “And that is where - everyone has done it super quickly, but no one has done it super accurately, and that is what is killing every single one of these guys, is losses.”
When asked if the losses in BNPL would get worse as the economic cycle turned and interest rates rose, Abercrombie replied: “No question. Interest rates affect everybody including us, but we know we have a profitable model because over the 15 years we’ve been in the game we’ve had interest rates well in excess of 10 per cent.”
Advertisement
Abercrombie made the comments as part of his attack on the board’s plan to sell Humm’s consumer finance arm to Latitude for about $300 million, given the board has highlighted the challenges in BNPL as one of its reasons for the deal. Abercrombie said this overlooked Humm’s past success in BNPL. All other directors are in favour of the deal, which will go to a shareholder vote in June.
Humm chairman Christine Christian said: “Andrew may have founded Flexigroup, but that does not give him the right to unilaterally dictate the company’s future at the expense of other shareholders.”
Commonwealth Bank chief executive Matt Comyn also predicted things would get more challenging for BNPL firms on Tuesday, telling the Australian Financial Review Banking Summit that splitting payments into instalments was “ubiquitous” and there was no “secret sauce” to this model.
Comyn said the marketing services provided by BNPL firms to retailers had potential, but the industry faced a squeeze on profit margins from rising interest rates, rising bad debts and a likely increase in regulation. “It only gets worse from here, and then you’ve got waves of regulation,” Comyn said.
While Zip’s share price has collapsed by 86 per cent in the last year, in part due to fears of rising bad debts, Humm’s share price is down by 23.5 per cent.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.
Save
Share
License this article
BNPL
Fintech
Andrew Abercrombie
Clancy Yeates
Clancy Yeates is a business reporter.Connect via Twitter or email.
MOST VIEWED IN BUSINESS
Russia’s main economic lifeline faces potent new threat
OpinionRussia’s main economic lifeline faces potent new threat
Coal crunch hits Origin’s Eraring power plant as energy crisis deepens
Coal crunch hits Origin’s Eraring power plant as energy crisis deepens
‘A compelling story’: Joe Hockey on Biden and Bubs’ $20m baby formula deal
‘A compelling story’: Joe Hockey on Biden and Bubs’ $20m baby formula deal
NSW bins the bag in its push to phase out ‘problematic plastics’
NSW bins the bag in its push to phase out ‘problematic plastics’
They spent a fortune on pictures of apes and cats. Do they regret it?
They spent a fortune on pictures of apes and cats. Do they regret it?
The noose around Russia is tightening
OpinionThe noose around Russia is tightening
FROM OUR PARTNERS
SMH RECOMMENDS
Hanson likely to get over the line, but writing’s on the wall for One Nation
SMH
Hanson likely to get over the line, but writing’s on the wall for One Nation
‘Very grave’: Italian pilot allegedly fell asleep during New York to Rome flight
World
‘Very grave’: Italian pilot allegedly fell asleep during New York to Rome flight
School expelled allegedly bullied student over parents’ behaviour, court told
National
School expelled allegedly bullied student over parents’ behaviour, court told
The noose around Russia is tightening
Business
The noose around Russia is tightening
PROMOTED
This may be the world's most secure NFT wallet
THE DAILY HODL
This may be the world's most secure NFT wallet
Social Energy
Sydney Homeowners Saving Big with Solar, Battery and a 40c Feed-In
Peter Matera ‘wouldn’t have survived’ heart attack if wife hadn’t been nearby
Sport
Peter Matera ‘wouldn’t have survived’ heart attack if wife hadn’t been nearby
Why Albanese will bring public servants in from the cold
National
Why Albanese will bring public servants in from the cold
00:46
Getting even more of the Macca's you love is easy as earning rewards pointsGetting even more of the Macca's you love is easy as earning rewards points
McDonald's Australia
Getting even more of the Macca's you love is easy as earning rewards points
Our top 5 crypto exchange picks.
Finder
Our top 5 crypto exchange picks.
From RATs to riches: COVID-19 test importers buy $16.5 million house
SMH
From RATs to riches: COVID-19 test importers buy $16.5 million house
PM really is a regular guy
National
PM really is a regular guy
Thank you for reading the Herald. This article is complimentary.
Register or log in now to read more articles and unlock extra benefits.
No payment required
READ MORE
Hide content
The Sydney Morning Herald
Twitter
Facebook
Instagram
RSS
OUR SITES
CLASSIFIEDS
THE SYDNEY MORNING HERALD
PRODUCTS & SERVICES
Copyright © 2022
SUBSCRIBE
(20min delay)