If you’re a keen online shopper, you’ll have noticed an option to pay with Afterpay popping up more frequently when you go to checkout.
But what is it?
Afterpay's 27-year-old CEO Nick Molnar describes his service as a reverse lay-buy. Instead of waiting, you get the product right away and pay for it over four instalments.
“So the customer pays nothing extra. We charge the retailer a small fee per transaction, we pay them the next day and we take all the risk.”
Three years after launching, he’s got 1.5 million customers and 12,000 retailers using his payments platform.
Bondi shop Tuchuzy is one of them. Afterpay is now their most popular payment method online.
“It has definitely catapulted sales of our online business,” says Tuchuzy General Manager, Gina Constantine. “Like high double-digit improvements in terms of conversions on our checkout.”
Like a credit card, Afterpay also sets limits on what you can spend when you first join - starting low and increasing over time. If you want to return a product, you do it through the retailer as normal, and they then communicate with Afterpay to cease billing.
Tuchuzy general manager, Gina Constantine, Source: Supplied
While Afterpay says its service is a win-win for retailers and customers alike, ASIC has concerns about the wider Buy Now, Pay Later sector.
In a statement, they told SBS that such companies may not be covered by consumer credit laws, which mean providers don't have to belong to an ombudsman scheme for dispute resolution. They'll be reviewing the industry this year.
“If someone is late, they can't use the system again until they pay that payment off, which is very different to traditional credit,” Nick says.
“For us, when someone goes late, we lose. We've paid the retailer we lose the money - we want people to be on time otherwise our business model just doesn't work.”
In a few short years, Afterpay's rise has been nothing short of meteoric. They listed on the ASX just nine months after launching in 2015, and have raised over $90 million to date.
Turnover has grown too. In 2015, they made about $200,000 from the fees they charge retailers.
That number has grown to $37 million - in just the first half of this financial year.
Nick credits his family, and the support of his co-founder Anthony Eisen, for his success.
“I come from a retail background, my family is in jewellery so they taught me everything I know about retail.”
Afterpay co-founders, Anthony Eisen and Nick Molnar. Source: Supplied
During university, he also sold jewellery online, gaining further insights into online retail.
Next, Nick's looking to use all he’s learned and apply it to a possible US expansion.
“Hopefully we can put an Australian tech company on the map globally. We'll give it our best go!”
