Afterpay is a ‘buy now, pay later’ (BNPL) program that makes it easy to purchase something now, collect your products, and pay them back later in the quarterly instalments.
Even though the Afterpay platform is and steadily, consumer advocates, including CHOICE, have expressed questions that BNPL schemes like Afterpay placed customers at financial risk. While it may be framed as a new twist on conventional layby, it’s actually another kind of credit.
How Afterpay Works
Afterpay serves as an intermediary channel for retailers and consumers. Afterpay loans to the manufacturer, and the consumer pays back Afterpay.
Although you will be rewarded instantly with your purchase, you will need to focus on making 4 quarterly payments over 8 weeks. These fees are of equal value for each transaction and are interest free. While Afterpay does not charge interest, it charges fees to traders who provide the service, and late fees to individuals who do not keep up with payment
Unlike most other payment items, Afterpay does not ask customers to join a loan or a credit service. This may sound good to the buyer because there are many things you can get from afterpay mobile phones to small disposable goods.
What Is Their Revenue Stream?
Most of Afterpay’s revenue comes from 43,000 involved traders. It has been confirmed that Afterpay rates them a $0.30 flat service fee plus a commission of between 3% and 7% for each transaction, which is significantly higher than what banks charge for processing other forms of payment. What retailers spend on taxes; they aim to make up for increased revenue.
Afterpay delivered more than $179.6 million in retail charges at the end of December 2019, with an extra $32.6 million in late fees or about 18.7 percent of their revenues, down from 24.4 percent in 2018. Some consumers were unable to meet their repayments, resulting in $6.5 million in debt collection and chargeback expenses.
How Do You Use Afterpay?
- Sign Up
To use Afterpay, you first must go to the app or website and sign up for an account. You must be over 18 years old, possess a valid Visa or Mastercard debit or credit card in your name and be able to agree into a legal binding contract. You sign up using a provable email address and phone number, and your ID will also be checked to help to prevent multiple accounts from being created.
If you’ve done this, you can begin using the Afterpay option when you check out, provided by the store, by logging in to the app.
- Create a barcode
If you have signed in, you can create a temporary barcode displaying the available expenditure that is scanned in the registry when you place your order. (This is only available to some retailers.)
After payment, a pre-authorization check will be made on your card up to the value of the first instalment, and you will be expected to make the first 25 per cent payment in advance at the point of purchase. It’s up to you to make the outstanding payments on time so you will not get late fees billed.
- Make a Payment
You can make a payment via your account on the Afterpay platform or through the application. You can enable automatic payments, or you can make them directly at any time before the due date. It is worth noting that Afterpay does not allow payments using BPay, bank transfer or prepaid debit cards.