After pay, Good or Bad?
By Madison Reeves
What is Afterpay?
After pay is a buy now, pay later platform that a lot of online stores and shops are starting to implicate. The platform makes it possible to order items, receive the item, and pay for the items over a period of time in four payment installments.
After Pay was founded in Sydney Australia in 2015, letting you purchase things from clothes and personal care products, to concert and plane tickets. After pay has gained a lot of popularity over the years. “As of December 2019, nine percent of Australians were using it.”
US companies are starting to implicate afterpay into their websites and it is working for them. As of right now the US has 275,803 sites that use the platform. We have surpassed Australia who has 32,082.
Although Afterpay is rapidly growing, consumer groups have raised concerns that Afterpay put consumers at financial risk. Although it is framed to look like a great way to purchase things, it's really just another form of credit.
Retailers who offer Afterpay may see an increase in sales, which is good news for them, but the flipside for the shopper is the danger of overspending, overcommitment and spiralling debt.
How afterpay works
Afterpay is an intermediary platform that is between the store and the customer. When you order your item afterpay will front the money to the company and the customer pays back afterpay within a 8 week time frame in 4 equal payments every 2 weeks.
For example, if you purchase a pair of jean shorts for $69 you will have four separate payments of $17.25 every two weeks.
Although this platform seems pretty perfect there are down sides. Afterpay doesn’t charge interest, they do charge fees to merchants who offer the service. As for customers, they charge late fees for when people don’t keep up with their payments.
“Afterpay doesn't require customers to enter into a loan or a credit facility, which means there are fewer protections in place for customers.” Some may see this as a positive, but it really means that there is less protection in place for customers.
“An ASIC study on BNPL schemes found that one in six people reported difficulty in meeting payments.”
The temptation of just doing it one more time is addicting. Seeing the smaller payments, getting your items right away, can get out of hand. Some may say, if you don’t have the money to spend at the time of the purchase you shouldn’t be getting it.
How do they make money?
“Most of Afterpay's revenue comes from its 43,000 active merchants. It's been reported that Afterpay charges them a $0.30 fixed transaction fee plus a commission between 3% and 7% on each sale, which is considerably higher than what they're charged by banks to process other payment types. What retailers spend in fees, they hope to make up for increased sales.”
“Afterpay generated more than $179.6 million in fees from retailers as of the end of December 2019, with an additional $32.6 million in late fees or roughly 18.7% of their revenue, down from 24.4% in 2018. Some customers couldn't make their repayments, leading to $6.5m in debt recovery and chargeback costs.”
Afterpay fees
Purchasing with afterpay means that you ar egoing to have 4 installments, one every 2 weeks. If you miss a payment you are then charged a $10 fee and, if you fail to make the repaymnet within a week, you are charged an extra $7 fee.
“In June 2018, Afterpay introduced caps on late fees, which means you won't pay more than $68 in late fees per order.”
If you meet all your payments you will have no troubles with fees or paying for anything more than your purchase, but that's the risk. This is a very tempting situation, but saving up money to purchase an item in full takes away the risk and trouble.
Bibliography
Built with. “Afterpay Usage Statistics.” built with, 2020, https://trends.builtwith.com/payment/Afterpay. Accessed 13 april 2021.
Evans, Wendy. “What is afterpay, and what are its risks?” choice, 2020, https://www.choice.com.au/shopping/online-shopping/buying-online/articles/what-is-afterpay. Accessed 19 march 2020.
I only know Afterpay for the little button at some online check outs, your blog was a great source of information!! It’s interesting to know that even consumer groups are concerned that Afterpay puts customers at financial risk as it seems to be another form of credit as you pay for your times over a period of time in four payment installments. Personally, I would rather pay for my item out right - for a one time price - or not even buy the item if I could not afford it yet. Afterpay just seems like a hassle and another thing that is unnecessary that you have to take care of. My question to you, being the author of this blog, would you use Afterpay? Why or why not?
ReplyDeleteI think a really interesting point that was integrated into your post was the drawbacks of after pay. We have to remember that big tech companies, the government, and just big businesses in general want money, no matter if they market it as different. So despite seeming like a better "cheaper" option in the short term, in the long term it is, like you said, basically another form of credit that must be payed with fees.
ReplyDeleteBefore reading this, I didn't even know that after pay even existed! I found this blog considerably helpful to me. All this information will do me a lot of good in the future. Personally, I would really prefer to not use after pay. It isn't safe, and you have pay over a 2 month period. If you buy are buying thing online once a week, it probably would not be good for your account. It also seems like you would have to go through a lot of trouble the finally pay for a product. What happens if you decide to return the product during this 8 week period? Will you get all your money back?
ReplyDeleteI like the idea of after pay especially for younger people to help teach them about recurring bills and the consequences of not paying the bills back. But I do agree with Devin it does seem like a lot of trouble to have to wait and pay a small fee every 2 weeks for something as small as shampoo and conditioner.
ReplyDeleteI honestly didn't even know after pay existed. I have seen it before and always wondered what it is. I personally don't think I would ever use it because I would rather pay upfront and not have to worry about it.
ReplyDeleteThis was super interesting to read. I have been seeing some websites that use afterpay when I am online shopping, but I never really knew what it meant or what it entailed. Now that I do know about it, I'm not sure if I would use it but some other people might think it's great for them!
ReplyDeleteMadison,as someone who loves to online shop, I've seen Afterpay but have always been a little wary of it. I never really understood what it was, so I was really cautious to use it, and still haven't used it yet. However, I really enjoyed reading your piece, and I definitely learned a lot. I appreciate how your formatted your post, it was easy to read and understand. Good work!
ReplyDeleteVery interesting! I did not know what after pay was though I have heard of it. This does seem helpful but I could not personally see myself using it. I would rather pay for things right away for the one time instead of having to worry about it. I like how informational this post was!
ReplyDeleteI think that this was a very interesting topic to write about. I have never heard of after pay, nor did I think that such a thing could exist, however I think that if the time is right and the benefits of this feature outweigh the negatives, I think that this would be a great option to utilize when shopping. I'm not sure if this is something I would personally use, however it is definitely something I will keep my eye on in the future.
ReplyDeleteI liked this post a lot. It was very informative when I read it. Whenever I would shop, I would see an option like that but I never really knew how it worked. I could see myself using this in the future. Great Job!
ReplyDeleteI liked this post a lot. It was very informative when I read it. Whenever I would shop, I would see an option like that but I never really knew how it worked. I could see myself using this in the future. Great Job!
ReplyDeleteI liked this post a lot. It was very informative when I read it. Whenever I would shop, I would see an option like that but I never really knew how it worked. I could see myself using this in the future. Great Job!
ReplyDeleteThe biggest question I have is can I get automatic payments set up with it? If so I would be able to never miss a payment. I like the idea of this process, but how do returns work. You get back the installments you paid? I can see myself using this type of payment method later in life.
ReplyDeleteI agree. The idea of After-pay is extremely enticing,but can lead to some minor debt if you don't use it smart. Like using it to purchase something that I could afford on a different day doesn't seem a bad idea, but if I were to attempt something that I couldn't even afford on a good day maybe I need to rethink the purchase.
ReplyDeleteI have seen after pay options when online shopping and I have never used it nor do I want to. Using that all the time really isn't smart because by you doing that means you most likely do not have the money to purchase the item in full. Basically, if you have the money to buy what you want/need then do it but if you don't I wouldn't pay for it let alone after pay it.
ReplyDeleteThis blog post is incredibly interesting and informative. I have heard of some of my friends using programs like this, and although I have never used this, I think that your post informing about what this is and how it works is beneficial for all of us. I never thought of the way that not using credit scores or impacting credit would have less protection for the customer, which you mentioned. Do you think Afterpay is a better way of paying in installments than carrying a balance on credit cards, which seems to be another common option?
ReplyDeleteI see afterpay being used on many sites but have never used it myself. I did not realize how fairly new this payment method is. I think it is important to know the drawbacks to using this payment method and how companies are making money off of it. Knowing that there could be a fee if you miss your payment is important to know if you use Afterpay. I also did not know you could use Afterpay to pay for concert or plane tickets. Afterpay has grown so much in the past few years and will most likely continue to expand. This topic was super relevant to the world we live in right now. Great work! (Ally Longden)
ReplyDeleteI’ve seen Afterpay everywhere but I haven’t really looked into how it actually works. I think it's a great platform that helps people still be able to buy the things they want/need but with affordable installments over the course of a few weeks. I know making those big purchases are difficult if you’re on a tight budget or just don’t have enough money, it’s an easy way to still be able to get it. It’s honestly like a loan but more consumer friendly in a way where people are able to invest in. Overall, I really enjoyed reading this and learning more about this platform, Awesome job, Maddie!
ReplyDeleteMadison, you did a very good job at explaining exactly what afterpay is. You were very unbiased and gave all the legitimate downsides to this program. It would have been helpful to hear about your experience with afterpay. Good job overall.
ReplyDeleteI've seen things similar to this while checking out while online shopping. There are downsides, yes, but all of them are at the expense of the customer. If someone purchases and bunch of things with money they don't have, that's their fault. The connection you made to credit is very accurate, it's essentially like the same thing just less formal and fewer repercussions for not paying. Like I said, I've seen it on websites, but never really knew how it worked, so this blog piece gave me a better understand. Although, I don't think I'll be using it anytime soon.
ReplyDeleteI do wonder how this system will work out in the near future. A similar buying process happened in the 1920s. As new products were placed on store shelves, the common person didn't have enough money to spend on them. So they would buy the product, then pay later. Eventually, the great depression hit, then, due to a low money supply, people couldn't pay back their debt, then those companies went under. I do hope the same thing doesn't happen again.
ReplyDeleteIt is fascinating how much trust exists in financial interactions in modern times, and taken out of context, it can sound unbelievable! It's almost like walking into a supermarket, bringing as much as you want home and leaving only a promise to pay it back later. It is amazing how much of our economy is built on trusting in credit and the economic system!
ReplyDeleteIn a business perspective this is smart. It's similar to how people spend more with credit cards because they aren't spending physical cash, except this takes one step further because you don't pay until later. I like how you also discuss afterpay in a consumers perspective. It will be very beneficial to me, now I know to avoid afterpay because they take charge more.
ReplyDeleteInteresting post. As someone who uses AfterPay quite often, I definitely agree with you that it is taking a risk. However, sometimes I find myself needing a certain item but I'm trying to save up money, so it's easier to make four small payments rather than one big one. I really enjoy using AfterPay and I definitely think it has helped me with saving my money and still being able to enjoy certain goods.
ReplyDeleteThis was very interesting! I had no idea that Afterpay existed, although I can see why it's very popular. I like that you covered the pros and cons of Afterpay for consumers and businesses, in addition to explaining what it is and why it was created. I wonder how more consumers are not having trouble making their payments, considering that missing payments is a large problem for credit card companies.
ReplyDeleteBefore reading this, I knew of Afterpay, but I really hadn't spent time looking into it and learning more about it. Generally, I tend to think of things like this in a negative light, because if I don't have the money then, why should I be spending it in the first place? You mentioned that this is a common thought about Afterpay, and I appreciate how you've also brought a lot more to the table to discuss.
ReplyDeleteMadison, you did a very good job at explaining exactly what afterpay is. You were very unbiased and gave all the legitimate downsides to this program. It would have been helpful to hear about your experience with afterpay. Good job overall.
ReplyDelete