Latitude predicts local BNPL shake-out, expands into Singapore

Latitude Financial boss Ahmed Fahour says there will be a shake-out in the local BNPL in the next 12-18 months because the market will stop funding the sector’s losses.

Latitude chief Ahmed Fahour says there has been a ‘massive’ surge in consumer spending in the month of November. Picture : NCA NewsWire / Ian Currie

Latitude Financial is expanding into the fast-growing, $5.5bn buy now, pay later market in South-East Asia, as chief executive Ahmed Fahour predicted a big shake-out resulting in many locally listed BNPL players going out of business.

Australia has 15 listed BNPL companies - the most of any exchange in the world.

“But in the next 12-18 months, a lot of them will go out of business because the market won’t keep funding their losses,” Mr Fahour told The Australian.

Latitude, he said, would be an exception because it had been in the instalment-payment business for 30 years, and was mostly targeting big-ticket items rather than smaller-scale purchases where competition was intense and the market was “saturated”.

The Latitude chief also said there had been a “massive” surge in consumer spending in the month of November.

“The revenge spending (after coming out of lockdowns) is happening,” he said.

“Australians and Kiwis have said: ‘Enough is enough, we’re going to have a great Christmas’, so when companies report their November numbers there will be an incredible uptick in the economy.”

For two years in a row, the usual $50bn-a-year spent by Australians on international travel had been delayed, but some of this money was now circulating in the economy with the reopening of international bookings.

Mr Fahour said the impetus to resume travelling was greater because future lockdowns were increasingly unlikely.

“I have noticed two things: the premiers of NSW and Victoria have said lockdowns are no longer as effective, and that we need to treat Covid like it’s the flu,” he said.

“So I’m incredibly confident that we’re moving to a stage of managing this virus like it’s a bad case of the flu.

“Otherwise, the consequences for society in terms of mental health and damage to the economy from using blunt instruments like lockdowns will be far greater.”

Latitude has chosen Singapore as its first location in Asia, and will partner with retailer Harvey Norman which has 12 stores in the city state.

The pre-Christmas launch in three Harvey Norman stores will be followed by incursions into other key Asian markets, including Malaysia.

Mr Fahour said Singapore was a major commercial hub in Asia and a logical entry point for the group’s BNPL business.

“In Singapore and Malaysia alone, we expect the BNPL market to grow to $3.8bn by 2025, with the market for bigger-ticket instalment plans estimated to be up to 10 million people,” he said.

Latitude sees Asia as a significant opportunity, with several of its merchant partners already strongly established in the region.

In-store and online payments in key Asian markets, excluding China, are expected to grow to more than seven times the size of the combined Australian and New Zealand markets by the 2024 financial year.

The countries include Singapore, Malaysia, Indonesia, Vietnam, Thailand, the Philippines, Japan, South Korea and India.

Latitude fast-tracked its move into Asia through an investment and subsequent rebranding of the assets of Singapore BNPL player Octifi.

Octifi launched in Singapore last year, using a mobile-based, consumer finance technology platform to offer interest-free instalment plans to customers spread over three payments.

Volumes for 2021 have exceeded $S10m ($10.2m), peaking at $S2.5m in November with 15,000 users and 325 merchants.

It will differentiate itself in Asia by expanding into bigger ticket BNPL in 2022, allowing customers to pay for purchases of up to $S10,000 on interest-free plans.

Two months ago, it launched LatitudePay+ to extend BNPL purchases to $10,000, with plans to lift that figure to $30,000 next year.

Latitude launched its BNPL business in Australia two years ago.

It has 5500 merchant partners and more than 500,000 open BNPL accounts across Australia and New Zealand.