Non-bank lender Nimble, which is targeting an ASX listing next year, warns many consumers are maxing out on purchases via buy now, pay later accounts and face a looming “debt spiral”.
Nimble, which is moving away from being a payday lender to offer more traditional loans, is turning away “a significant portion” of customers seeking finance because they are overcommitted on buy now, pay later purchases.
Nimble chief executive Gavin Slater — a former National Australia Bank executive — is concerned that many customers are getting into financial difficulty with multiple buy now, pay later accounts.
“People are not conscious of what the cumulative impact of all these transactions will be in terms of their net cashflow,” he said.
“They are overcommitted on their buy now, pay later commitments and they are getting themselves into a debt spiral.”
Mr Slater noted that Nimble was approving just 15 per cent of total customer applications for new loans, with many being turned down due to buy now, pay later exposures.
“We are not approving that (loan). If you say that a payday lender is going to say no to this, it’s got to tell you something,” he said of buy now, pay later operators approving purchases when customers were deemed unable to repay credit by Nimble.
Mr Slater wants buy now, pay later operators to be brought further into the regulatory net.
“It is unambiguous that it is an instrument in the provision of credit. The only thing that is different is that the merchants pay,” he said.
“There is a need for some form of consolidation to allow customers to get through this and more responsibly manage their finances.”
Industry players such as Afterpay and Zip have argued the sector doesn’t need more regulation as it works as a budgeting tool for consumers and provides additional sales for retailers.
The most recentsurvey by the corporate regulatorof the buy now, pay later sector, released late last year, found 21 per cent of users had missed a payment in the past 12 months.
A broader Nimble poll of 1,002 people conducted this month found that 27 per cent of respondents would not be able to pay an unexpected bill of $1000.
Mr Slater said the company wanted to plug a gap in the market between buy now, pay later products and credit cards, as part of a move to cease being a payday lender by mid next year.
Nimble started makingstrides away from payday lendingtwo years ago, and has pushed into personal and car loans.
The Australian Securities & Investments Commission put the payday lending sector on notice in 2015, telling players to improve their practices or risk further enforcement action.
Payday loans have much higher interest rates, shorter terms and smaller amounts.
Nimble is shifting to more traditional lending, but will still cater for some customers that don’t fit standard bank lending criteria.
The company hopes to rule off a capital raising in coming weeks ahead of a pre-initial public offering funding round in the first half of 2022.
“All things being equal, we are targeting a listing in October next year,” Mr Slater said.
Nimble wants to have a loan book of about $250m in coming years but its portfolio declined in 2020 as COVID-19 jitters saw many borrowers pay down debt faster.
The company also had several months of modest losses last year, but Mr Slater said it was returning to profitability.
Nimble this month launched a virtual prepaid Mastercard, issued by EML Payment Solutions, to provide customers with access to $1000 to $10,000 for periods of up to 12 months.
It allows customers to set fixed repayments on the limit amount after a credit assessment is conducted.
The interest rate ranges from 15.99 per cent to 25.99 per cent and a $10 late fee is incurred - in each repayment cycle - if payments are not made within two days of the due date.
When asked about the top end of the interest rate range being as high as a credit card, Mr Slater said he hoped the rates would decline as Nimble lowered its cost of capital.
SENIOR BANKING REPORTER
Joyce Moullakis is a senior banking reporter. Prior to joining The Australian, she worked as a senior banking and deals reporter at The Australian Financial Review.
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