Point-of-sale lender Afterpay, which got its start in financing online purchases, now offers its installment loans to U.S. consumers shopping at physical retailers.
The arrival of an in-store option comes at a time when many traditional retailers are suffering from a drop in foot traffic due to the coronavirus pandemic. Afterpay says allowing in-store shoppers to finance their purchases in four installments could help U.S. merchants increase sales.
“We want to be able to support them because they have the opportunity to ramp up and reopen,” said David Katz, global product manager for the Australia-based company.
Afterpay is experiencing a boom in new borrowing options that threaten to take market share from the credit card industry. The mobile-centric lender has grown rapidly since entering the US market in late 2018. At the end of June, it had 5.6 million active customers in the United States, up from 1.8 million a year earlier.
Afterpay allows buyers to split transactions into four equal payments that are due every two weeks. Its customers – often young adults who buy clothes or cosmetics – do not pay interest, although they may be charged late fees if they miss a payment.
Retailers give Afterpay just under 4% of the revenue they generate from sales, CEO Anthony Eisen said in an interview in early March.
Afterpay’s in-store offer is a digital card that can be added to Apple Pay or Google Pay. Once the card is set up, customers can use it to make contactless payments at participating retailers, just as they would with any other card in their mobile wallet. The user interface notifies shoppers how much they have to spend and, once they have selected an item to purchase, how much each installment payment will be.
“We have a predominantly millennial, Gen Z base, and they demand solid mobile experiences,” said Alex Fisher, US marketing manager at Afterpay.
The product has been in the works since before the coronavirus crisis and is currently available in pilot mode in select US stores. Upcoming launches are planned at retailers such as Forever 21 and Skechers. Afterpay has been offering in-store financing in Australia since 2016 and claims that around 40% of its active Australian customers use this option to pay at checkout.
Some other point-of-sale lenders have also made their financing available to buyers in physical stores. San Francisco-based Affirm has been offering its installment loans in Walmart stores across the United States since early 2019.
Afterpay is one of many companies – others include Sezzle – in the nascent consumer credit segment known as Buy Now, Pay Later. Afterpay and the San Sezzle are both listed on the stock exchange in Australia, where their stock prices have skyrocketed during the pandemic. Unlike traditional lenders, both companies have benefited from their heavy reliance on e-commerce income.
Sezzle’s average monthly underlying merchant sales in the quarter ended June 30 were $ 62.7 million, compared to $ 39.8 million in the previous quarter and $ 14 million in the same period a year earlier . The Minneapolis-based company on Friday announced a capital increase of $ 55 million, saying it plans to use the proceeds to accelerate its growth strategy and strengthen its balance sheet.
Afterpay said Monday that its underlying U.S. sales reached $ 1.1 billion in the quarter ended last month, up 62% from the three-month period ended March 31.