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Gareth Vaughan on BNPL & private equity woes, Australia's China-induced wine glut, globalisation's demise in the Ruhr, AI, Y2K & technology doomsaying repeating

Economy / opinion
Gareth Vaughan on BNPL & private equity woes, Australia's China-induced wine glut, globalisation's demise in the Ruhr, AI, Y2K & technology doomsaying repeating

This Top 5 comes from's Gareth Vaughan.

As always, we welcome your additions in the comments below or via email to And if you're interested in contributing the occasional Top 5 yourself, contact

See all previous Top 5s here.

1) Australia no longer buy now, pay later heaven.

Yet another Australian Securities Exchange (ASX) listed buy now, pay later (BNPL) service provider has hit turbulence. Splitit Payments Ltd is inviting shareholders to participate in an online extraordinary general meeting on Tuesday, September 5.

Splitit wants to raise money and says if it's not able to access convertible note financing it's unlikely to be able to obtain other, alternative financing on similarly favourable terms, is projected to breach its existing debt covenants under a Goldman Sachs warehouse funding facility, and there'll be a shortfall of funding for the continued business operations, "which will likely adversely affect the ability of the Company to continue to operate in the short term." 

Grant Halverson, the Melbourne-based CEO of retail banking and payments consultancy McLean Roche and a BNPL critic, suggests in a LinkedIn post Splitit delisting from ASX with some key shareholders taking the company private is the most likely outcome.

Australia once quoted as BNPL ‘heaven’, has gone from 12 to 2 listed BNPL Fintech ‘players’, ZIP and Sezzle the only survivors (minor strugglers Doough, Fatfish cling on) who have neither scale or balance sheet strength and are in pure survival mode.  

The once mighty sector which peaked [at] $85 billion market cap (briefly) is now worth less than $500 million – view just some of the disasters:
Affirm - exits Australia less than 18 months after entry - forgives all loans!!
Afterpay - worthless inside Block, now only 7% of revenue. Closes Spain, Italy and France
FuPay - gone bust (they even shut down their LinkedIn page)
humm group - Regulator says no new customers (revoked), UK/NZ exit
INKPAY - collapsed into administration – gone bust
IOUpay - gone bust
Klarna - losing $40 million a month, a very small player
Latitude Financial Services - exited all BNPL, awful data breach & CEO exits
Laybuy - delisted 30% staff cuts and $50 million loss
Marqeta - (powering BNPL cards) shuts down APAC operation
Openpay - gone bust
Payright - delisted and gone fishing
Sezzle - shares down 95% 
Splitit - *NEW* delisting from ASX?
Zebit - delisted, ran back to US
Zip Co – both Founders/CEO's demoted, while rearranged deck chairs on tug boat (too small to be [the] Titanic).

Halverson featured in an episode of our Of Interest podcast in early March. He suggested many BNPL companies wouldn't be around for much longer because the rising interest rate environment had dramatically increased their funding costs.

'I think it [the future] is very dismal. I think unless they can be bought by somebody most of them [BNPL companies] will have disappeared by the end of this year. They're all in trouble, they're all in deep trouble," said Halverson.

Last week the New Zealand Government said its move to bring BNPL under the Credit Contracts and Consumer Finance Act, BNPL companies currently peddle unregulated debt, will leave them exempt from affordability and suitability assessments. Instead BNPL lenders will have to complete comprehensive credit reporting when customers sign up or increase their credit limit.

Perhaps Commerce and Consumer Affairs Minister Duncan Webb sees a brighter future for the sector than Halverson.

2) Private equity firms forced to hold on to assets, sit on capital, in high interest rate environment.

Many years ago in what feels like a previous lifetime, the then-Fletcher Building chief executive Ralph Waters made some interesting comments in an interview I did with him. This was before the Global Financial Crisis (GFC) as a private equity acquisition boom ran rampant.

Waters warned of private equity's "irrational exuberance" and suggested their debt dominated acquisitions could lead to "train smashes" in the future. Fletcher had recently been outbid by Australian private equity firm Catalyst Investment Managers for Metropolitan Glass. Waters' noted Fletcher, which had clear merger cost saving opportunities, had seen its bid trumped by almost $100 million as Catalyst coughed up $370 million.

Waters was proven correct and it was hard to have much sympathy for the private equity sector. Local deals done at or near the top of the market, such as Yellow Pages, MediaWorks and Metropolitan Glass, hit the skids after the GFC hit.

Like the BNPL sector, it's interesting to hear what's going on with the private equity sector now, during a period of high interest rates and various other disruptions.

According to Bloomberg's Alex Webb, private equity firms are having to hold on to the businesses they've acquired, in deals typically dominated by debt, for increasingly long periods. That also means the private equity investors have to wait for their return.

Private equity “exits”—via sales or initial public offerings—have fallen to their lowest level in a decade, excluding the pandemic-hit second quarter of 2020, when the global economy stalled.

“This slowdown came on the heels of such a hot year in 2021,” says Emily Anderson, managing director of sponsor coverage at the investment bank Union Square Advisors LLC. “We had Covid, lots going on in the political environment, interest rates, the Silicon Valley Bank crisis, the war in Ukraine—that’s a lot of hits for one market to handle in a short time horizon.”

To be clear: Private equity firms do want to sell. But only for the right price. And caution is rampant among buyers—including the firms themselves. Every year a fair portion of companies sold by PE firms are bought by other PE firms. Today those firms are sitting on a record pile of unspent capital: about $1.5 trillion, according to Preqin Ltd., the investment data company. Since most deals are at least partly debt-funded and interest rates are high, private equity barons are less eager to open their checkbooks.

3) Chinese tariffs lead to Aussie wine glut.

Every now and again we have a gnashing of teeth episode in NZ about the importance of China as a trade partner. Critics may point to a perceived over reliance on China for our exports, or allegations of mass human rights violations against the Uyghur people, China's increasing influence in the South Pacific, or its crackdown on democracy in Hong Kong.

(We addressed this issue in an Of Interest podcast episode with Stephen Jacobi, Executive Director of the New Zealand International Business Forum, last year).

Australia, which has had a more adversarial relationship with China over recent years than NZ, has seen some of its exports suffer as a consequence. For example, the ABC reports on an estimate there's more than two billion litres of Aussie wine in storage, the equivalent of 2.8 billion bottles. Why? In large part because of the near complete loss of the Chinese market.

China was Australia's most valuable export market in 2020, but a year later, anti-dumping tariffs effectively ended the lucrative trade.

At the same time, exports to the United Kingdom also dropped off after hitting a peak in 2020, as the economy opened back up after COVID restrictions and people drank less at home.

China's anti-dumping tariffs ranged between 116.2 per cent and 218.4 per cent on bottled wine and saw a trade worth $898 million in 2020 trickle to just $8.1 million in the year to June 2023.

The overall value of Australian wine exports to all markets has dropped by 33 per cent over the past two years.

The tariffs are subject to a dispute before the World Trade Organisation.

4) The end of globalisation.

On a hunt for evidence of deglobalisation, Wolfgang Münchau takes us to the German city of Duisburg in the Ruhr valley in this New Statesman article.

 Duisburg had served as as the west-European hub of China's Belt and Road project. However, the Covid-19 pandemic and Russia's invasion of Ukraine followed by western sanctions against Russia, have made the rail traffic too expensive to insure, Münchau says. Thus Chinese port operator Cosco sold its shares in the Duisburg port terminal.

Münchau's article is a good read. Here's a taste of it.

Belt and Road came at the end of a distinct period in modern economic history – the age of hyper-globalisation. This period started with the cessation of the Cold War and ended with the pandemic. Its first decade was mostly about trade liberalisation: the World Trade Organisation became the new global trade authority. Countless trade deals followed. The 1990s were also the decade of the internet and of financial deregulation. In Europe, it saw the introduction of the single market, and set the stage for the enlargement of the EU in the subsequent decade.

But the most consequential change of all was the integration of China into the global economy. China supplied the world economy with cheap labour. Germany, China and other Asian countries were the workshops of that system. They ran large and persistent trade surpluses against the rest of the world. The US and the UK were the system’s bankers. The US acted as the benign hegemon. It absorbed the world’s excess savings by running large and persistent trade deficits. Global imbalances were not a bug of the economic system, but a feature.

Globalisation was not primarily about the trade in goods. The share of goods trade increased rapidly in the 1990s and early 2000s, peaked around the time of the global financial crisis in 2008, and has stagnated since. What distinguished the period from 1989 onwards was the globalisation of other factors: capital and labour. Freedom of movement in the enlarged EU brought to western Europe the “Polish plumber” and the “Lithuanian waiter”. Trade is not what our modern era of globalisation is about. It is about people.

Globalisation was a win-win game for the world economy at an aggregate level. What the supporters of globalisation did not see, or did not want to see, were the rising numbers of losers: in the Rust Belt of the US, in northern England, northern Italy, northern France and eastern Germany. Donald Trump’s America First campaign in 2016 was a reaction against globalisation. So was Brexit. Each country has become unhappy in its own distinct way. But what they have in common is a fall in political support for the old system.

In the EU, which often follows global trends with a delay, the worst is still to come. The foreseeable decline of the automobile industry feels like a slow-moving car crash. The global automotive industry was until recently dominated by three countries: Japan, Germany and South Korea. Then, in 2022, China suddenly emerged as the world’s largest car exporter. When German car companies were busy fitting emissions-test cheating devices to their diesel engines, China started strategic investments with the intent to control the entire supply chain of electric cars. It succeeded.

5) AI, Y2K & tech doomsaying.

In this interesting and informative video, Bloomberg tech editor Nate Lanxon looks at current fears artificial intelligence (AI) will take over the world and wipe out humans through the lens of the fear the millennium bug (Y2K) would be catastrophic as clocks ticked over from the year 1999 to the year 2000.

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So a fine Barossa red to be had at a bargain price? Can't complain about that.


Yup, I for one have been enjoying the increase in Australian wine availability and the cheaper prices.  Especially considering that NZ wine prices are now completely ridiculous. 



Indeed and we are heading to S. Australia in Oct. The only wine region there we haven't yet been to is Clare Valley, but we will put that right this time. We had a full week in the Barossa a few years ago.


BNPL is a business where it was obvious from the start that there would only be one or two dominant competitors.  Like VISA and Mastercard.  It was merely a question of which company would end up #1 and which the much smaller #2.  Klarna has the EU, Afterpay has Australasia, and it seems the US is going to be a tussle between Affirm and Afterpay.  The first mover advantage is almost insurmountable, and Afterpay was pretty lucky that the US was late to the BNPL party so it has a shot at being #1 there.  BNPL is here to stay, and its huge customer base will simply be leveraged to upsell them to more profitable banking and credit business.


They aren't profitable business models. They are very high risk, very low margin businesses when you realise they borrow their loans from banks on short terms with a very high default rate.


re #4

The peak and decline of globalism was inevitable (from a physical POV) and Saul was one of the prescient ones:…

I've had a copy since before the GFC - and he suggests the peak was 1995. Mike Moore and Gatt; all downhill since then. We can also call it the peak of misguided thinking - then came the GFC, since then it's been extend and pretend; the debt/expectation overhang is eye-watering.


The millennium bug (Y2K) was pushed by computer salesmen. They made their case to managers ignorant of computer programming. The IT staff kept quiet because their careers would be enhanced by new hardware and software.

This contrasts with AI doomsaying where the nearer you get to the real experts the greater the fear.