2023 Survival Guide: Why BNPL Must Ditch Gross-Merchandise Volume To Thrive

January 9, 2023 | Micky Tesfaye

Let’s be blunt: 2022 was a catastrophic year for BNPL. In fact, the only silver lining was the distraction of FTX’s epic unraveling.

In the blink of an eye, BNPL has gone from a credit card killer to…well, something decidedly less so. Klarna, once the shining star of Europe's tech ecosystem, has become an outcast: It was forced to accept fresh funding at a staggering 85% discount on its previous $45 billion+ valuation. And US-peer Affirm is faring even worse: its value has tumbled a shocking 89%. WTF? Indeed!

With SBF, the paragon of effective altruism about to be locked up, instead of small miracles and distractions, 2023 is the time for BNPL to get serious, and do it fast.

Instead of boring you with data and facts, I fed ChatGPT a scenario to create a story to illustrate my point…

BNPL's catastrophic year: The insights we can't afford to miss (A story by Micky and ChatGPT)

Defer-O-Matic and the VC were in the middle of a heated argument in the conference room of the VC's office. Defer-O-Matic was furious, feeling like the VC had set them up for failure.

"How could you do this to us?" Defer-O-Matic exclaimed. "You told us to scale the business, and now you're saying you won't invest any more money? We're about to go bust and it's entirely your fault!"

The VC sighed and tried to explain. "I understand that you're upset, but we can't control the macroeconomic environment. Interest rates have unexpectedly gone up and the outlook is not great. We did encourage you to scale, but we also told you to be mindful of your burn rate and to focus on sustainable growth. Your burn rate is much higher than we anticipated and we're not seeing the kind of growth we were hoping for."


  1. I asked my co-writer to come up with a few tongue-in-cheek names for a BNPL company name. Some of the other hilarious options were: "Buy Now, Pay Later...or Never", "Pay Later Palooza", "Indefinite Credit Co.", and "The Endless Payment Plan"!

Defer-O-Matic gestured wildly. "But we've increased our GMV by more than 20% and reduced our credit losses to less than 1% of GMV! That's not sustainable growth?"

The VC shook his head. "GMV is meaningless if your revenue on that GMV is less than 3%, especially if your credit losses are a third of your revenue. You need to focus on generating actual profits, not just increasing the volume of sales."

Defer-O-Matic was taken aback. "But we thought that was what you wanted. You said you wanted to see 20% year-over-year growth in GMV." The VC sighed again. "Growth is important, but not at the expense of profitability. We can't continue investing in a business that is not generating sufficient profits. I'm sorry, Defer-O-Matic, but we have to make this difficult decision."

Defer-O-Matic was stunned. "But you refused to support our plans to become profitable, saying that we would lose market share. Now you're telling me that profitability is the most important thing? I don't understand." The VC leaned back in his chair and looked at Defer-O-Matic with a serious expression. "As a startup founder, it's important to remember that big numbers like GMV might look nice, but they have no fundamental value if they aren't backed up by genuine business metrics like profitability and a strong revenue model. You need to focus on building a sustainable and profitable business, not just chasing big numbers for the sake of it. It's a tough lesson, but it's one that we hope you'll take to heart as you move forward."

Defer-O-Matic nodded slowly, taking in the VC's words. It was a hard lesson learned, but one that they knew they would never forget.

The moral of the story: In 2023, remember all that glitters isn’t gold

Defer-O-Matic sat in the conference room, feeling defeated and confused. They had thought they were doing everything right, following the VC's guidance to the letter. But it seemed that they had misunderstood the VC's priorities and now it was too late.

As Defer-O-Matic replayed the argument in their mind, they realized that they had been so focused on increasing their GMV and reducing their credit losses that they had lost sight of the bigger picture. They had neglected to focus on profitability and building a strong revenue model, and now they were paying the price.

Defer-O-Matic knew they had to make a change. They couldn't afford to make the same mistakes again. As Defer-O-Matic left the conference room, determined to learn from their mistakes and build a successful and sustainable business, they made a pledge.

From now on, they would focus on building a profitable and sustainable business, no matter what the VC or anyone else said. They knew it wouldn't be easy, but they were willing to do whatever it took to make Defer-O-Matic a success. [Emphasis Micky’s, lol]

Micky Tesfaye

Content Lead

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