Afterpay is making lots of American friends.
The three-year-old Melbourne, Australia-based installment payment firm just hit the U.S. in May and has already signed on its 1,000th merchant, Rebecca Minkoff.
Afterpay helps shoppers pay in interest-free installments, taking 25 percent of the purchase price immediately and then automatically deducting the balance from the consumer’s account in three payments over six weeks. The merchant pays a fee and gets the full payment immediately while Afterpay takes on any risk associated with nonpayment.
It’s an approach that has taken hold in Australia, where Afterpay acts as something of a gateway to brands and processes 25 percent of all e-commerce orders in the fashion and beauty space, including brands such as Estée Lauder and Lululemon.
The business launched in the U.S. with Urban Outfitters Inc., later adding Revolve and now Rebecca Minkoff. The brands offer an Afterpay button on their check out page. The pitch to consumers is simple: “Shop now. Enjoy now. Pay later.”
Nick Molnar, chief executive officer and cofounder of Afterpay said the approach works and that brands using the installment system have seen conversion rates and incremental sales increase by 20 to 30 percent.
Molnar said the momentum in the U.S. has helped attract retailers, who have approached the company after seeing the service on Revolve or elsewhere. He described it as “the amazing power of the network as we bring more retailers live.”
In Australia, many users start their shopping journey on Afterpay and then go to retailers that use the service.
Afterpay facilitated payment for 150,000 shoppers in the U.S. in July, the most-recent statistic available. The number now could be well higher as more firms have joined up.
Molnar said the trends in the U.S. sync up with the business in Australia and that 85 percent of customers link their Afterpay account to a debt card and not a credit card.
He said younger consumers are debt-averse and want to pay for their purchases — if on a slightly longer time line.
Uri Minkoff, ceo and cofounder of Rebecca Minkoff said: “As we continue to cater to and attract a broader Millennial audience, we believe Afterpay will align with their purchasing patterns and online engagement. Staying close to our customers has always been a priority and investing in this enhanced online experience has been a critical brand investment.”