@lostThis area of BNPL/small business loan is a really tough for several reasons :
- most of the companies are still loss making,
- their business model has not been tested yet in a recession (apart perhaps during the short initial covid period),
- not obvious to figure out how loan margin will move if we are about to enter a recession (ability to pass increase in funding cost, while their rates are already high ?).
According to what I saw recently, Money Me was able to decrease its funding cost, as they diversified their source of funding. But it was before the recent period when there is both an increase in interest rates and increase in spreads for loans.
- if there is a recession, it should significantly affect their level of delinquencies.
One segment in this sector which may be more mature : the EFTPOS operators.
2 listed companies : Tyro and Smartpay (SMP).
While Tyro remains a tough case, SMP may be an interesting.
They have a mature business in NZ (cash cow) and has a strong growth in Australia.
Basically, their business is to get a commission on every transaction their customers are doing, using their ETFPOS terminal.
One of the risk : if there is a major deterioration for cafe/restaurants and shops, more customers may struggle to pay them.
