A Klarna rival collapsed into bankruptcy after millions of pounds was stolen in a cyber attack.
The collapse of Laybuy, a buy now, pay later (BNPL) start-up, followed a previously unreported hacking between December and February that left the business on the brink.
Laybuy, which had more than 750,000 customers and was headquartered in New Zealand, filed for administration in June after struggling to crack the UK market. The group had revenues of around NZ$42m (£20m).
It comes as start-ups in the unregulated sector brace for a Treasury crackdown on BNPL lending. These loans, which split payments into multiple chunks with a 0pc interest rate, have surged in popularity as an alternative to credit cards.
In an administration document, restructuring experts blamed the cyber attack for precipitating Laybuy’s collapse. They said the cyber attack resulted in “material cash losses”, which caused Laybuy UK to “breach the terms of the UK secured lending facilities and created cash flow difficulties for the group as a whole”.
The impact of the cyber attack was in the region of £1m to £2m, a source said. It is understood hackers stole funds as well as creating fraudulent accounts to take out loans.
In June, the company’s chief executive, Gary Rohloff, blamed the collapse on “the economic downturn” and “increased fraudulent activity”, which created the “perfect storm that was difficult to recover from”.
Public reviews show multiple Laybuy customers complaining their accounts had fallen victim to hacking or fraud.
The administrators said they were reviewing their options to make a cyber insurance claim after the attack.
Following the hack, Laybuy launched an emergency sale process to try and salvage the business. The company’s New Zealand arm was sold to Klarna last week, although its UK arm was not included in the deal.
Labour is planning a regulatory crackdown on the BNPL sector after more than £16.7bn was spent in 2023 in the UK using the payment method. The Conservatives previously pushed back efforts to regulate the emerging sector.
Research from Citizens Advice estimated that as many as one-in-five BNPL users had missed or made a late payment after turning to the apps, while 10pc had been visited by a bailiff or enforcement agency.
In July, Tulip Siddiq, the Economic Secretary to the Treasury, said: “Regulating buy now, pay later products is crucial to protect people and deliver certainty for the sector.
“The Government will be looking to work closely with all interested stakeholders and will set out its plans shortly.”
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