- What is Afterpay?
- Applying superior innovation to Afterpay
- How Afterpay generates revenue
The younger generation is more aware of how to avoid excessive debt. Superior innovation enables firms to develop and implement products that are more efficient and effective resulting in customer satisfaction and ultimately generates more revenue (Sok, 2019). Molnar’s theory: “Millennials have a total aversion to credit [cards],” because they can lead to compounding debt (Klauflin, 2018).
Afterpay Touch Group Limited is an Australian financial technology company that facilitates business to consumer sales. Founded by Nick Molnar and Anthony Eisen in 2014, the consumer lending business is based in Melbourne, Victoria and operates in New Zealand, the United States and the United Kingdom.
Afterpay allows consumers to pay for items in four interest-free installments (Kruger & Hatch, 2019). By utilising this idea, Molnar and Eisen have created an empire by dominating the market and have successfully overtaken their competitors [ZipPay]. Less than four years after launching, their market value is $1.5 billion (Klauflin, 2018).
Critics are baffled as to how the company generates revenue due to their no interest policy (Kruger & Hatch, 2019). Afterpay allows shoppers the luxury of buying an expensive item [up to $1000] and paying it off in four fortnightly installments. If a payment is missed, the shopper will incur a late fee of $8. The majority of Afterpay’s revenue comes from retailers [4-6% of every transaction to offer the service] (Klauflin, 2018).
A social media campaign promoting Afterpay to retailers went viral encouraging retailers to jump on the bandwagon. Online retailers who adapted to Afterpay noticed a significant increase in order sizes from 20-50% (Klauflin, 2018). Afterpay recently innovated by offering their service instore rather than solely online.
Implementing an interest free policy for consumers allows the organisation to rapidly grow. Consumers are more obligated to use Afterpay and are likely to spend more money. Retailers are charged a small fee per sale via Afterpay however, due to an increase in revenue, retailers are becoming more inclined to offer the service both in-store and online.
- Afterpay is an Australian financial technology company that facilitates business to consumer sales.
- Superior innovation enables firms to develop and implement products that are more efficient and effective resulting in customer satisfaction and ultimately generates more revenue [implementing an interest free policy for consumers].
- Afterpay generates revenue through retailers and late fees.
Klauflin, J. (2018) How A 28-Year-Old Turned Layaway For Millennials Into A Billion-Dollar Business, Available at: https://www.forbes.com/sites/jeffkauflin/2018/07/03/how-a-28-year-old-turned-layaway-for-millennials-into-a-2-billion-business/#6001ad9759db(Accessed: 5th September 2019).
Kruger, C., Hatch, P. (2019) Millennial masterstroke: All credit to Afterpay in generation grab, Available at: https://www.smh.com.au/business/companies/millennial-masterstroke-all-credit-to-afterpay-in-generation-grab-20190228-p510ws.html(Accessed: 5th September 2019).
Maher, J. (2018) AFTERPAY VS. ZIPPAY, Available at: https://latergator.com.au/blogs/news/afterpay-vs-zippay (Accessed: 5th September 2019).
Sok, P. (2011) Achieving superior innovation-based performance outcomes in SMEs through innovation resource–capability complementarity, Available at: https://www.sciencedirect.com/science/article/abs/pii/S0019850111001581 (Accessed: 5th September 2019).