The Australian and Security Exchange Commission is looking into why the share prices of buy now, pay later platforms Afterpay, Zip and Flexigroup plummeted on Wednesday morning.
The market volatility occured two days before a senate committee examining the buy now, pay later sector hands down its final report.
According to the Sydney Morning Herald, Afterpay’s stock plunged 11 per cent within 25 minutes between 11.15 am and 11.40am.
Afterpay is owned by the AfterPay Touch Group. Currently, Afterpay Touch Group is at $16.89 on the ASX, down 3.15 per cent.
ASIC spoke to senate estimates overnight stating it was aware of the trading and the volatility was a concern. The watchdog said it will be following up to see what caused the drop and if any further investigation is needed.
The senate inquiry may recommend tougher regulations for the booming credit providers, potentially bringing them under the arm of the wider banking sector.
In October, the senate requested an inquiry into the credit and financial services targeted at Australians at risk of financial hardship to the senate economics references committee.
It is investigating Afterpay, ZipPay, Certegy Ezi-Pay, Oxipay, BrightePay and Openpay.
Last November, ASIC released a report stating there needed to be tighter regulations for the buy now, pay later platforms as one in six users are facing financial troubles.
The majority of the users are between 18-35 years old.
The first review of the industry showed consumers thought they could afford more expensive items due to the incremental payment system.
Today Zip Pay posted its financial results for the previous six months, reducing its loss from $14.6 million last year to $6.8 million.
Its revenue was up 114 per cent to $32.4 million.
The Afterpay Touch Group will be releasing its half year financial results next Tuesday.