Openpay falls into receivership as economic reality crashes into Australian BNPL players

Australian buy now, pay later (BNPL) player Openpay has fallen into receivership, becoming the first major local player to buckle in 2023.

On Monday, restructuring firm McGrathNicols announced it was tapped to handle Openpay’s operations, with Barry Kogan, Jonathan Henry, and Rob Smith appointed as joint receivers and managers.

The trio will “work closely with Openpay’s employees, merchants, and customers to urgently determine the strategy for the business,” the firm said in a statement.

For now, Openpay is shut to new customers.

“At this time, customers will no longer be able to use the Openpay platform for new purchases, but are still required to pay any outstanding balances in accordance with their existing agreements,” McGrathNicol added.

Openpay’s receivership arrived just days after it voluntarily suspended its ASX listing on Friday.

News of its departure from the ASX followed a quarterly report celebrating revenue of $10.1 million, up 59% from the prior corresponding period — and a worsening cashflow, which saw the company burn $18.2 million over the quarter.

Bad debts held by Openpay customers also increased, the report noted, climbing from 1.4% of all contracts to 2.2% over the quarter.

At the same time, Openpay said its bank balances and other cash equivalents sat just north of $17 million.

Openpay’s receivership comes after a long string of interest rate hikes, which increase the cost of borrowing for fintechs, making it more expensive for them to offer ‘interest-free’ BNPL services to their customers.

Openpay also significantly drew down on its financing facilities over the year: while the company estimated it had 16.5 quarters of funding available in January 2022, that dropped to just 3.2 in the latest report.

The company indefinitely paused its US operations and expansion plans last year, citing “the likely ongoing capital investment required” to succeed as interest rates lifted.

While most major BNPL providers ask users to repay their purchases over a period of weeks, OpenPay offers terms of up to 24 months, with fees of up to $5 per fortnight.

OpenPay users also pay an upfront deposit, unlike competing BNPL providers, which allow customers to make a purchase without committing any funds in the moment.