Australian fintech Brighte says its decision to lay off 15% of its staff was not motivated by fears of bad debts plaguing the buy now, pay later (BNPL) market, even as experts predict further hardship for the sector.
The Australian Financial Review reports Brighte, which provides interest-free finance on home solar panel installation, recently cut 32 product development and corporate roles from its business.
Those layoffs are backdropped by broader turbulence in the BNPL sector, as the threat of higher interest rates, lower consumer spending, and increasing bad debts spook growth-focused investors.
Market conditions have undoubtedly changed in recent months, a Brighte spokesperson said Tuesday, resulting in “increased volatility and uncertainty affecting the broader tech sector”.
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The company is now “prudently and proactively adjusting our cost base for long-term sustainable growth,” they said.
But the recent job cuts do not indicate Brighte is facing all the same stresses as other BNPL providers, the spokesperson added, stating its bad debts remain at a minimum.
“Brighte continues to maintain extremely low levels of arrears and hardship and we monitor these closely to better support our customers,” the spokesperson said.
Brighte offers familiar payment systems in radically different markets
Rock-bottom interest rates and stimulus-induced consumer spending powered BNPL providers to extraordinary share market valuations through 2020 and 2021, but investor sentiment across the sector has soured in recent months.
Shares in American payments juggernaut Block have plummeted after last year’s acquisition of Australian fintech Afterpay, while shares in Zip currently sit around 52 cents, down from a high of $12.35 in February last year.
That about-face can largely be attributed to investor fears over BNPL operators providing finance to those unable to pay it back.
Brighte would have observed “a huge rise across the whole sector of bad debt”, says Professor Steve Worthington, a payment systems expert at Swinburne University.
“Whether you’re funding people buying clothing or shoes or solar panels, people have overextended themselves and been unable to pay off the payments required by buy now, pay later,” he told SmartCompany.
But Brighte maintains its unique position in the BNPL landscape has shielded it from a tide of bad debts.
“Brighte has a strong consumer portfolio of home owners, with an average age of 45+ and with exceptionally strong credit scores who are looking to make capital investments in their homes,” the spokesperson said.
In a 2020 report on the BNPL sector, the Australian Securities and Investments Commission found 4% of Brighte payments incurred late fees in the 2018-2019 financial year, compared to 10% of Afterpay payments in the same time period.
Although it offers interest-free financing, and is a signatory of the BNPL sector’s self-imposed Code of Practice, the average Brighte user is very different to fast-fashion shoppers using pay-in-four services, the company claimed.
“Solar is a considered purchase — not an impulse buy — and our customers experience a financial benefit in the form of saving around $1000 per year on average on their energy bills,” the spokesperson said.
Worthington says the spectre of harsher credit regulation would also play into the minds of BNPL operators like Brighte, but the company says it is well-positioned to meet tomorrow’s market conditions.
“The generational megatrend of the energy transition is stronger than ever and Brighte is at the frontline,” the spokesperson said.
Brighte says it has approved more than $1 billion of financing through its system, resulting in upgrades to 100,000 households.
The company secured $100 million in Series C funding in late 2020, with some $78 million coming from early investors Mike and Annie Cannon-Brookes through their Grok Ventures project.
It also made history by launching Australia’s first 100% green asset-backed security on the local market as part of its debt funding plans.