What is Afterpay? Buy Now Pay Later Explained
Afterpay is a new and innovative payment option that can really help your company. This solution allows customers to pay for products in a series of payments rather than paying for the entire purchase upfront. Using such software has enabled many businesses to increase the size of their online shopping carts, overall profits, and exposure to new customers.
What is Afterpay, and What do they do?
Afterpay was founded in 2015 and is a buy now pay later service. Customers can pay off their purchases with payments every two weeks. Millions of customers use it, and billions of dollars worth of transactions have been completed thanks to Afterpay.
It differs from other payment methods because Afterpay is an intermediary between your business and customers. Afterpay pays your business for the good or service you sold to the customer. Then the customer has to pay Afterpay.
What is Afterpay‚Äôs Upside?
Increased Payment Options
The buy now pay later model allows customers to have increased flexibility when it comes to paying for their purchases. As a result, merchants that offer buy now pay later options see an increase in sales as they have more payment options. In addition, customers are less likely to abandon a purchase as they do not have to put up nearly as much money upfront.
They do the Work for You
With Afterpay‚Äôs model, your business does not have to worry about collecting customer payments. Instead, once Afterpay pays for the purchase, they handle the rest allowing your company to focus on what you do best.
Wider Customer Base
Buying now and paying later can be especially valuable for merchants with online transactions that are typically in the hundreds of dollars. Afterpay payments make purchases such as these less daunting to customers. This, in turn, increases the number of customers that can purchase your products.
With a buy now pay later model, the customer will pay for part of the purchase up front. This is typically around 25% of the final purchase. Then they will pay the remainder with several interest-free payments. Rather than paying a large sum upfront, customers can pay a much smaller percentage.
It is a popular choice for smaller purchases online as the customer only has to pay a few dollars at a time. The popularity of this payment model has increased since the pandemic started, along with the rise of online shopping.
Unlike other buy now pay later services, Afterpay does not conduct credit checks. This means more customers can use Afterpay to buy your products. Afterpay has also become increasingly popular among younger customers. This likely means its popularity will continue to grow. The data backs this up: In 2021, Afterpay exposed merchants to 13% more customers. Customers are much more likely to purchase from your site if you offer Afterpay as a payment option.
You can apply for a merchant account with Afterpay or use their integration on popular eCommerce platforms such as Shopify and WooCommerce.
Increased Shopping Cart size
In 2021 Afterpay increased online shopping cart size by 17% and merchant profits by 11%. Additionally, Most customers indicate that they spend more with buy now pay later payment methods than they would normally use. 3
What is Afterpay‚Äôs Downside?
Afterpay also only works with companies that sell physical items that ship to customers quickly. If you cannot get goods to customers within 14 days, they cannot work with you. In addition, there are transaction limits that depend on the merchant. These typically range from $1000 to $1500. If your business commonly conducts transactions greater than this, Afterpay likely is not a viable payment option for your business.
With BNPL being such a new industry, there is a chance the fees companies, such as Afterpay, charge increasing as they become less focused on expansion. While merchants are protected from most of the risks of such payments, your company must remain vigilant for any potential fraud.
There is an increased risk of fraud as very little information is required from buy now pay later services for customers to use them. However, with just a little information, people can easily make fraudulent purchases.
Fortunately for your company, the customers are paying Afterpay, not you. So you can avoid the costly chargeback process by offering buy now, pay later payment options.
Other BNPL Options Out There
Afterpay is one of several different buy now pay later options available for your business. The typical fees merchants pay to use these services range from 2% to 8% per transaction.
Klarna offers a variety of financing options to your customers. This allows you to be incredibly flexible when offering payment options. Their pricing could be more transparent, but they charge 3.29% to 5.99% + 30 cents on average.
Affirm is better for companies that have much larger average transactions. This is because Affirm‚Äôs transaction limit is $17,500. Unfortunately, they do not make their prices public, but third-party reports indicate that their fees are similar to Klarna.
Zip is a good option for smaller transactions. Unlike most buy now pay later options, customers can also use Zip for in-person transactions. Like other services, their merchant fees are not public but are reported to range from 2%-4% + 15-30 cents.
Splitit is an excellent option if you conduct more international transactions, as it is accepted in over 50 countries. In addition, their fees are readily available on their website, unlike other options. But Splitit can only integrate onto a few eCommerce platforms currently.
Buy Now Pay Later with Treati
Treati is an excellent choice of payment processor if you are interested in offering buy now pay later options for your customers. We are committed to providing your company with as many payment options as possible so your customers can always choose the best option.
Thanks to our integrations with eCommerce platforms such as Shopify and WooCommerce, you can easily use Afterpay for your business. We also work with other options, such as Klarna and Affirm. Additionally, our partners at CardConnect offer their own buy now pay later option that your business can take advantage of. Afterpay is an excellent choice for your business and offers numerous benefits. If you want to learn more about how Treati can help you with buy now pay later payments or any other payment solutions, please do not hesitate to contact our team.