Nick Molnar thinks Millennials have gotten a bad rap.
The chief executive officer and cofounder of Afterpay, a modern and more streamlined version of layaway that lets shoppers get their purchases right away, has heard all of the stereotypes about Millennials, from being driven by free food to entitled thanks to overeager parents. But, as a Millennial himself, he sees how wrong those perceptions are, along with ideas of how and why the generation spends their money.
“I was in New York City on holiday with my family when the 2008 financial crisis really hit and the media was all over [the debt aspect] — they said you should [only] spend the money that you have,” Molnar said. “Millennials totally shifted how they spend their money from any other previous generation.”
The core of that shift is an aversion to credit cards and taking on credit-card debt that has been integral to spending for decades. While this aversion stems from the financial crisis, which had roots in irresponsible home lending, it’s also been influenced by an extreme increase in U.S. student loan debt, which has more than doubled in the last decade and now exceeds $1 trillion. Millennials, essentially forced to take on a massive debt load right out of their teens, aren’t looking to take on any more than absolutely necessary.
“Millennials are more scared of credit-card debt than they are of dying,” Molnar said. “That’s a bold statement.”
Even with a strong responsibility streak, Millennials still like to shop and Molnar admitted there are aspects of the typical Millennial that fit in with the stereotypes. Instant gratification, for one, and high expectations for brands for another. Those are two areas Molnar wants Afterpay to work. By splitting brand purchases into four equal payments, without charging interest, Afterpay can reduce sticker shock and gives brands and retailers more flexibility.
“No one says, ‘Oh, I love how I paid for that,’ but we believed that if we could bring together this Millennial lifestyle and create a product that was the way they want to spend their money, they would be vocally loyal to us.
Since its 2012 launch in Australia, where Afterpay now works as a form of payment with 14,000 retailers and is used by less than two million shoppers, Molnar said shopper reactions have been “fascinating.” There’s a Facebook appreciation group with 250,000 members that also serves as a way to refer people to Afterpay. Using retailers, the company receives thank-you letters regularly and while it does charge a fee for missed payments, shoppers are not allowed to keep buying with Afterpay until any fees are caught up, meaning it doesn’t participate in the debt cycle.
But it is a business that needs a reliable revenue stream, which comes from brands and retailers. Molnar said Afterpay charges about 2 percent more than other payment processing services, but part of its pitch is that “we pay the next day and we take on all the risk.”
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