BNPL group Splitit ‘separating from the pack’

Splitit says it is immune from the headwinds facing its buy now, pay later rivals, and investors have sent its shares soaring.

Buy now pay later stocks have tumbled in recent months amid outlook concerns. Picture: David Mariuz/NCA NewsWire

Shares in buy now, pay later provider Splitit have rallied, with the company declaring it is immune from the headwinds facing other BNPLs, amid an ongoing sector-wide sell-off.

The New York-based payments company jumped by as much as 9.1 per cent on Monday after it said it widened margins and cut expenses, in a trading update for its fiscal second quarter.

Amid a challenging economic landscape it lifted its net transaction for the three months ending June 30 to 1.33 per cent from 0.15 per cent a year earlier, and trimmed operating expenses from $US6m ($7.35m) to $US5m.

It also increased merchant sales volume by 27 per cent year-on-year and said it took “significant steps” to reduce cash burn and move towards profitability. Its shares were up 6 per cent to 18c at 3pm AEST.

“Splitit is separating from the pack,” the company told investors on Monday. “Headwinds facing other BNPLs – escalating write-offs, high marketing expenses to acquire consumers and sharp drop in instant credit approvals – do not impact our business.”

The company is busy executing its new strategy with it said is made up of three pillars – distribution partners, white-label and unlocking BNPL for card issuers. It describes itself as the only white-label instalment.

solution allowing consumers to pay by instalments using their existing payment card at checkout without increasing their total credit exposure.

Shares in buy now, pay later providers like Zip, Sezzle and OpenPay have fallen more than 95 per cent from their highs, with Sezzle’s stock falling 50 per cent last week along after its planned merger with Zip collapsed.

Latitude’s planned takeover of Humm’s consumer business also fell over in June, with the sector struggling to retain credibility and positive investor sentiment.

Despite its climb on Monday, Splitit shares are still down 68 per cent over the past 12 months.

The sector is facing new regulations from the Labor federal government to bring BNPL operators like Zip and Afterpay under credit laws.

Splitit chief executive Nandan Sheth said his company’s business model differentiated from rivals in that it doesn’t offer credit. Instead, retailers use the existing credit on a customer’s credit card to turn purchases into smaller equal monthly instalments.

Splitit CEO Nandan Sheth. Picture: Supplied

Splitit is headquartered in New York and has offices in Israel, London and Australia. It entered the Australian market through a partnership with Kogan in 2019, joining a crowded field of BNPL providers all jostling for clients.

Mr Sheth, a payments industry veteran, joined the company in February.

“I am encouraged with the progress made across all three growth pillars in my first full quarter at Splitit, as we seek to execute on our new strategy to power card based instalments globally,“ Mr Sheth said.

“Our differentiated business model that unlocks existing credit for merchant funded instalments is becoming the most viable alternative to the high friction and high risk legacy BNPL services.

“The industry is starting to recognise that Splitit’s unique model stands apart in a crowded space of players extending unsecured loans to subprime consumers.

“Our new strategy will continue to mature over the next 12 months. As we rebalance our existing merchant

portfolio, focusing more on acquiring large profitable merchants, the benefits of this pivot will continue to be realised through 2022, and beyond.”

The company also appointed two new directors, adding payments industry veteran Dan Charron to its board as an independent non-executive director, and Mr Sheth as CEO.