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Among the several notable features of the pay-later sector when BNPL first entered the public consciousness was the general absence of late fees. In the United States, early mover Affirm was typical in its criticism of the practice, citing it as evidence of poor customer care by incumbents. Now Klarna is bringing the penalties to its offerings in the UK, its third-biggest market globally. (BNPL has become a big presence in British e-commerce, with the value transacted in January up by a tenth year on year : almost one in every eight pounds spent online came through the format.)
Starting in the middle of this month, Klarna will impose a £5 ($6) fee on borrowers where a promised payment has failed to materialise. That should produce an immediate balance-sheet fillip: in its Benelux operations, the lender found that the level of on-time payments rose by a fifth when the measure was introduced.
The company's full-year results for 2022 this week revealed rising losses (totalling 10.5 billion Swedish crowns: $1bn), though performance picked up in the final quarter. The value of goods purchased through the platform last year (Gross merchandise value: GMV) swelled by more than a fifth, stimulating revenue growth of 19 percent. In the fourth quarter, its global credit-loss rate was slashed by almost a third to 0.58 percent.
The United States is now Klarna's biggest market: as the annual report notes, America "remains an engine of growth with GMV up 71 percent YoY in 2022, made all the more impressive as we improved credit loss rates by 37 percent at the same time".
Another set of full-year accounts that has been exciting comment this week came from digital high-flyer Revolut, though the year in question was in fact 2021 rather than 2022 as a much-delayed balance sheet was published for that year. The numbers were only signed off by auditor BDO this week, accompanied by the observation that there could be "materially misstated" totals given that BDO failed to verify £477 million ($576m) of revenue.
The problem reportedly lies with accounting procedures that proved unfit for purpose as the company's growth rocketed, although BDO has come in for criticism from the accountancy regulator over the quality of its work on several of its reports. In any event, the boom in crypto seems to have been decisive for Revolut's transaction volumes, leading it to a debut profit of £26m in 2021 (having suffered losses of £223m the year before) on trebled revenues of £636m, which then went on to reach £850m in 2022.
Following the lead of many other European banks baulking at the scale of specialised investment required, Spain's Banco Sabadell has opted to sell off its payments unit, in this case called Paycomet, to a standalone acquirer: Italy's fast-expanding Nexi. The deal is valued at €280 million ($370m). The Paycomet purchase comes with over 300,000 merchant contracts.
As noted in Argus Advisory Research's current report for the country, Spain boasts one of the largest acquiring networks in Europe with more than five terminals for every 100 adults. Paycomet has been chasing Santander's second place in the market, with the leading acquirer being Comercia Global Payments, a joint venture between CaixaBank and the eponymous payments giant.
Fiserv and Worldline had also been in the running for the Paycomet acquisition, attracted by the prospect of the player's 16 percent plus of Spanish POS revenue. Purchaser Nexi had a busy 2021 with June bringing a merger deal with Nordic rival Nets, quickly followed by a controlling share take in Greece's Alpha (a JV with the leading bank of that name). However, despite its proclaimed ambitions and control of the Concardis brand in German-speaking countries, core Continental markets as yet remain out of its grasp: last September, it was revealed that 55 percent of its business was generated in its domestic market, with some 22 percent in the Nordics. This move into Spain will see non-Italian operations finally become less than half of the business undertaken.
Other stories of interest this week...
Canada: Proposed payments regime open for public comment
Europe: OpenWallet Foundation launches to boost digital wallet interoperability
US: Inflation and recession jitters haven't quelled consumer spending
US: U.S. Bancorp signals CFPB has turned up heat in prepaid cards probe
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The Weekly News Digest from Argus Advisory Research highlights significant developments in payment cards, digital payments, acquiring, processing, retail banking and consumer credit. Our writers and researchers frame these items in contexts such as historical, sectoral and regional trends, adding a layer of value often missing from the rolling news cycle.
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