BNPL firm Openpay pauses US operations to focus on Australia, shares soar
:Australian buy-now-pay-later (BNPL) firm Openpay Group said on Friday it would pause its U.S. operations and cut its workforce, as unfavourable borrowing conditions and reduced consumer spending proved major headwinds to growth.
Shares of the Melbourne-based firm jumped 20.8 per cent to A$0.145 in their best intraday percentage gain since Jan. 12, while the broader market was up 0.5 per cent after two days of losses.
The group said the decision would allow Openpay to allocate available capital and funding to its Australian business, given its "continued strong growth, market-leading margins and unique market positioning".
Australia accounted for 68 per cent of the group's total transaction value of A$339 million ($233.81 million) and nearly half of its 541,000 active customers, at the end of fiscal 2021. (https://bit.ly/3bBV6rw)
The move comes only eight months after Openpay went live in the United States, with expectations that the lucrative market in the world's biggest economy would become its core growth engine. (https://bit.ly/3y7T0an)
"Openpay's decision will result in no further investment in its existing U.S. operations in the near term, subject to one-off costs associated with the restructuring," the firm said in a statement.(https://bit.ly/3uh1D1b)
While Openpay said it would materially lower its workforce in the United States and retain only a skeleton team, it did not disclose the number of people it would lay off. Openpay did not immediately reply to Reuters' request for comment.
The BNPL sector, which saw unprecedented growth over the last two years, faces a reckoning as conditions that fuelled its growth - ultra-low interest rates and the COVID-19 pandemic - come to an end.
Sydney-based Zip Co, which has lost nearly 95 per cent of its market value since last July, has been forced to raise fees for customers and merchants to battle soaring inflation and rising interest rates. Swedish payments firm Klarna in May laid off about 10 per cent of its 7,000 employees.
Shares of Sezzle Inc and Beforepay Group have slumped 91 per cent and 90 per cent respectively so far this year, while those of Block Inc in Australia have declined about 50 per cent.
($1 = 1.4499 Australian dollars)
