In much the same way people think of Apple when smartphones are mentioned, or Tesla when the topic of electric cars comes up, Afterpay has become synonymous with the entire Buy Now Pay Later (BNPL) sector.
As is the case with the likes of disruptive behemoths such as Apple and Tesla, Afterpay played a pioneering role in popularising a particular product. It richly deserves all the praise it gets for disrupting the payment space, resulting in significant benefits for both retailers and consumers.
But just as an iPhone isn’t inevitably the right fit for every smartphone user and a Tesla isn’t always the logical choice for every electric car driver, Afterpay (or an Afterpay-like platform) isn’t necessarily always the best BNPL option for every merchant. If you suspect you may be one of those Afterpay merchants, or are a retailer wondering what sort of BNPL will allow you to attract new customers and up the average order value with both new and old customers, you’ll want to read on.
Part of the reason Afterpay has generated so much media attention is because it has a great origin story. The short version of the tale goes something like this: post-GFC, one young Australian realised that their generation had been traumatised into fiscal conservatism. As a result, they were far less inclined than their Boomer and Gen X predecessors to run up debts on credit cards. Credit cards that, more often than not, charged extortionate rates of interest.
The upside of this credit-shunning approach for Millennials was avoiding eye-watering interest payments. The downside was the inability to purchase anything they couldn’t currently afford.
The Afterpay founders (the teenager who had the epiphany soon partnered with a similarly aged neighbour) decided to use technology to create a form of reverse layby. One where young people could buy what they wanted now and pay for it – without incurring interest charges – later.
Within six years of launching, Afterpay has become one of Australia’s highest-profile start-up success stories. The Afterpay founders rightly get credit for playing a pivotal role in creating a globe-spanning BNPL industry. No doubt, many Afterpay merchants are perfectly happy with the service Afterpay provides, as are countless consumers. Lots of Australians, both consumers and business owners, sign up to Afterpay every day.
But in the same way many people find that a Samsung, Huawei or Lenovo smartphone is a better fit for their requirements than an Apple one, many businesses might find that a white-label BNPL generates more sales than Afterpay or Afterpay-like platforms. So, you might want to research your options before joining the ranks of Afterpay merchants.
There is now a burgeoning collection of BNPLs operating in Australia: Afterpay, Brighte, Bundll, Creditline, Humm, Klarna, Latitude Pay, Laybuy, Openpay, Payright, Sezzle, Splitit and Zip Pay. While ‘Afterpaying’ has now entered the language in the same way as ‘Googling’, it’s not the case that Afterpay dominates the BNPL space in the same way Google dominates online search. Many consumers talk of ‘Afterpaying something’ when what they really mean is that they have ‘BNPLed something’.
It’s clear that consumers, especially younger ones, have enthusiastically embraced BNPL in recent years. However, there’s little evidence to suggest they have brand loyalty to any particular BNPL provider. In fact, there’s growing evidence that consumers actually want a direct payments relationship with the brands they know and trust (for example, Uber, Amazon and Apple).
There is a common misconception that BNPLs such as Afterpay are profitable (or on the path to becoming profitable) because of the fees they charge. In fact, the fees BNPLs charge merchants are relatively modest. And given most consumers pay off their BNPL debt in the required time, BNPLs make a lot less money from charging consumers late fees than is commonly imagined.
As is the case with many tech businesses, BNPLs are, in almost all cases, profitable because of the commercially valuable data they are in a position to collect. It should be noted that this data harvesting is perfectly legal. Any new customer of a BNPL who takes the time to read the privacy policy will be informed that data collected during BNPL transactions can be shared with third parties.
It appears few retailers and even fewer consumers are concerned about this arrangement. But ecommerce business owners would be well-advised to understand the drawbacks of this data harvesting before they fill out the Afterpay merchant sign-up form.
All BNPLs attempt to remove what they regard as unnecessary friction from the checkout process.
But, for a conventional BNPL that wants to harvest valuable data, a certain amount of friction is unavoidable. A conventional BNPL will require consumers to go to its site and set up an account (i.e. answer some questions, upload proof of identity and create a password) or download an app before anything can be purchased. That may not sound onerous, but it creates a significant layer of friction. Friction that may result in lost sales, if a consumer doesn’t happen to have an account with the BNPL provider a merchant uses. (“Having to create a new user account” is one of the top reasons consumers give for cart abandonment.)
You may be wondering why one of the many new BNPL entrants hasn’t sought to separate itself out from the pack by creating a real alternative to Afterpay and Afterpay-like-platforms.
As it happens, one has. A merchant-and-consumer-friendly, fully integrated, white-label BNPL called Limepay was launched in 2016. Afterpay support connect
As Limepay doesn’t seek to harvest data during the checkout process, it’s able to offer a near frictionless payment solution. One that allows consumers to activate an account in a matter of moments during the checkout process (with no need to create a password). And one that allows a business to own the customer relationship and brand experience from start to finish.
Thanks to its commitment to providing industry-leading customer service to both merchants and their customers, Limepay looks set to become Australia’s next big BNPL success story. That’s encouraging news not just for Limepay’s backers, but also for Australian business and consumers that want access to an ethical and straightforward BNPL payment solution.
Want to know why the likes of Accor, Domain and Puma have embraced Limepay’s payment solution? Want to learn more about how switching to a white-label BNPL provider could generate double-digit revenue increases? Click here to get Forrester’s Total Economic Impact study of Limepay.