Comprendre l'inflation et le contexte économique actuel

6 Questions

What was the highest inflation rate ever achieved in the Eurozone?

8.6%

What was the first rate hike by the European Central Bank in the history of the euro?

75 basis points

What is the immediate impact of the rate hike on Alma?

Higher financing costs

What is the impact of a high interest rate on consumers?

They save money

What is the goal of Alma when raising prices on non-profitable merchants?

Break even

What is Alma's priority in order to fight overindebtedness?

Increase acceptance rate

Study Notes

Inflation in the Eurozone reached 8.6% in June 2022, its highest level ever, due to the rise in energy prices caused by the war in Ukraine.
On 8 September 2022, the European Central Bank (ECB) decided on another rate hike: it raised its three key rates by 75 basis points (to 1.5%), a first in the history of the euro, ending nearly a decade of rates below 1%.
As a result, consumers' creditworthiness has been strongly impacted.
For Alma: this has an immediate impact on our financing costs (from 5% to 5.6% interest rates in recent months).
For consumers: it is more expensive to borrow money, but the return on investment is higher when it is invested.
When rates are high, consumers save money. If they save more money, they spend less money so it reduces inflation because there is less money in circulation.
The positive impact of this economic mechanism will take time before we see the good effects on inflation (decrease) and in the meantime we have to face higher financing costs.
The BNPL business model was born out of a very low interest rate environment which allowed BNPL companies to raise funds (borrow money) at a relatively low cost and offer their customers easy access loans (shop/online).
Now the industry faces a challenge as the circumstances that have fuelled its 'explosive' growth come to an end.
As mentioned above: consumers are cutting back on spending and rising interest rates are driving up financing costs for all BNPL players, squeezing margins for all of us.
Alma decided to play both on the acceptance rate and on the prices (special cases) in order to increase its margin.
But above all: it should be remembered that from the very beginning, Alma has always been the most responsible BNPL player on the market. The protection of end consumers against overindebtedness has always been a major concern for Alma.
Unquestionably, the number one priority has been and is to continue to fight it, and consequently, to review the acceptance rate.
The company is considering increasing prices on non-profitable merchants, in order to improve their performance and break even.
This is in line with their goal of growing the business in a sustainable way.
All market players are currently passing on their cost increases to their customers.
This could lead to some customers feeling that their costs are going up too much.
The company is aware of this, and is working to ensure that their customers are still satisfied.