Rising rates put pressure on Buy Now, Pay Later space: Philly Fed's Harker
Melpomenem

"Rising rates have drastically changed the landscape for Buy Now, Pay Later" operators, said Philadelphia Fed President Patrick Harker Wednesday in opening remarks at its Fintech Conference.
The model looked "robust" in a low-interest rate environment, he said, because instead of funding the BNPL loans through deposits, the lenders borrow money that they turn around and lend. "Typically, their revenue comes from fees charged to merchants," Harker explained.
Now interest rates are rising, due to the Federal Reserve's tightening cycle. "Forced to borrow at higher rates, these firms are facing pressures they simply weren't last November. Unsurprisingly, major operators in the space have retrenched, with one of the leading lenders shedding 10% of its workforce last month," he said. 
In May, Klarna (KLAR), a closely held BNPL operator, announced plans to lay off 10% of its workforce.
Last month, Redburn analyst Fahed Kunwar discussed such pressure on BNPL lenders in a note that also downgraded PayPal (PYPL) to Neutral.
Still fintech's opportunities "to reach the economically constrained and financially marginalized are truly exciting â and very important. Itâs now on all of us to seize them," Harker said.
Earlier Wednesday, St. Louis Fed President James Bullard said the Fed is going to "be tough" to get inflation back to its 2% target.