Afterpay’s Model: How Does Afterpay Make Money?

Are you tired of shelling out big bucks for your purchases upfront? Well, you’re not alone. Afterpay has emerged as the go-to solution for savvy shoppers looking to snag their favorite items without emptying their wallets right away. 

With its simple yet brilliant model, Afterpay has swiftly risen to the top ranks of the global payment solutions game. But here’s the million-dollar question: how does Afterpay keep the cash flowing?

Here’s the deal: Afterpay lets you split your payments into bite-sized chunks over time. It’s like having your cake and eating it too! But wait, there’s more. Afterpay charges a fee to the merchants who utilize its platform and dishes out late fees to customers who miss their payment deadlines. Clever, right? But there’s an extra twist—Afterpay also harnesses the power of data to offer merchants valuable insights into their customers’ spending habits.

In this article, we’ll dive headfirst into the Afterpay model, dissecting this popular Buy Now, Pay Later phenomenon to unravel the secret behind their moneymaking machine.

Overview of Afterpay’s Business Model

Afterpay has taken the world by storm with its innovative Buy Now, Pay Later platform. With a casual and customer-friendly approach, it offers a convenient way for shoppers to make purchases and split their payments into four installments over time. Whether you’re eyeing the latest fashion trends from H&M or browsing through ASOS’ extensive collection, Afterpay has got you covered.

The concept is simple yet brilliant. When you buy an item through Afterpay, you pay a fraction of the total cost as a down payment, followed by three more payments. The first payment is charged immediately, and the remaining three payments are spread out over 14 days. This flexibility empowers customers to indulge in their shopping desires without breaking the bank.

What’s great about Afterpay is that it caters to both online and offline shopping experiences. You can use the platform to purchase items from a wide range of retailers, ensuring that your favorite stores are just a few clicks away. If you prefer the convenience of mobile shopping, Afterpay has you covered with their user-friendly app. Just download it, and you can make purchases on the go, although a small transaction fee may apply.

Afterpay has expanded its reach far and wide, making it available in numerous countries across the globe. From its roots in Australia and New Zealand, it has gained popularity and conquered markets like the United Kingdom and many others. Wherever you are, chances are you can benefit from Afterpay’s convenient payment solution.

At its core, Afterpay relies on the success of its customers to generate revenue. That’s why the company actively encourages shoppers to make use of its Buy Now, Pay Later feature. With clever marketing strategies, Afterpay has built its brand and attracted new customers through various channels. They leverage the power of social media, television advertisements, and in-person marketing to spread the word and establish themselves as a leading player in the payment industry.

Moreover, Afterpay understands the value of partnerships. By teaming up with banks, retailers, and telecommunications companies, they have extended their services at no cost to customers. This partnership program has propelled Afterpay to the forefront of payment solutions, solidifying their position as a global leader.

How AfterPay Makes Money

Afterpay is a popular credit card alternative that lets you spread out your payments over time. What’s interesting is that the company manages to make money without charging customers any interest. 

In 2021 alone, Afterpay raked in a whopping $924.7 million in income, with a net margin of $434.1 million. 

So, how do they do it? Here are the clever ways Afterpay generates revenue, even without charging interest or fees on purchases.

1. Merchant Fees

Afterpay, the popular credit card alternative, has found ingenious ways to generate revenue despite not charging customers interest or fees. The primary method is through merchant fees, whereby Afterpay charges companies a percentage of each transaction, typically ranging from 4% to 6%. 

This fee structure allows retailers to benefit from offering Afterpay as a payment option, as it not only increases conversions and average order size but also replaces credit card processing fees. In 2021 alone, Afterpay accumulated an impressive $910.9 million from merchant fees, solidifying its position as a key revenue stream.

2. Late Fees

Although Afterpay is known for its interest-free model, the company does charge users late fees if they fail to make payments on time. When a customer misses a payment, Afterpay processes the payment using the debit or credit card associated with the account. 

If the payment remains outstanding, Afterpay charges a $10 late fee initially. After seven days, they attempt another payment, and if it fails again, a $7 late fee is applied. This cycle continues until the customer either settles the bill or reaches the maximum late fee, which is either $10 for orders under $40 or 25% of the order amount.

In 2021, Afterpay collected $87.2 million from late fees. However, it’s worth noting that late fees used to contribute a larger percentage of the company’s revenue. Following consumer complaints and allegations of predatory lending, Afterpay revised its model to better serve its users, as reported on

3. Cost-per-Click Advertising 

With its extensive user base primarily composed of Millennials and Gen Z, Afterpay is leveraging its audience to sell advertisements to brands within the Afterpay app. 

By offering potential growth for many brands, Afterpay’s platform becomes an attractive advertising space. They claim that their app generates an average of one million referrals per day through their Shop directory. 

While Afterpay has incorporated advertisements into its business model, the company has not yet disclosed the exact revenue generated from this source.

4. Subsidiaries

In addition to its core operations, Afterpay also generates revenue through its subsidiaries. Two notable examples are Clearpay, a UK-based Buy Now, Pay Later (BNPL) service, and Pagantis, a Spanish e-commerce transaction company. 

Although Afterpay does not disclose specific financial figures for these subsidiaries, it is evident that they contribute to the overall profitability of the company.

Is Afterpay Worth the Investment?

Afterpay, the popular buy now, pay later provider, has been gaining significant traction among consumers. With its no credit check policy and absence of interest charges, it has emerged as an appealing alternative to credit cards. 

However, as with any investment, it’s essential to weigh the pros and cons before deciding whether Afterpay is worth your money.

The Exploitation Concerns

One issue that has plagued Afterpay is the accusation of exploiting young people by enticing them to make impulsive purchases they cannot afford. Critics argue that this can lead to financial trouble for vulnerable individuals. 

Moreover, concerns have been raised about the potentially predatory nature of Afterpay’s late fees. These concerns should not be taken lightly, especially considering Afterpay’s popularity among teenagers. It is important to carefully consider the ethical implications of investing in a company that operates in such a space.

Regulatory Uncertainty

Another factor to consider when evaluating Afterpay as an investment opportunity is the regulatory landscape. Currently, the buy now, pay later industry has largely escaped significant regulatory action. 

However, there is no guarantee that this situation will continue indefinitely. Some media personalities and experts are calling for increased regulations that could potentially impact the revenue and operations of companies like Afterpay. This regulatory uncertainty introduces a level of risk that investors should be mindful of.

Positive Growth Indicators

Despite these concerns, Afterpay has demonstrated considerable growth in recent years. From 2020 to 2021, the company’s underlying sales saw an impressive increase of 102%. Furthermore, the number of users surged by 63% during the same period. 

These growth figures indicate that Afterpay has successfully captured a significant portion of the market and continues to expand its user base.

The Bottom Line

Afterpay operates on a revenue model that involves charging fees to both customers and merchants. They make money through transaction fees, item fees, customer usage fees, and late payment fees. 

Moreover, they generate revenue by selling customer data to third parties like advertisers and marketing firms. While this model may raise concerns for some, it’s important to note that Afterpay’s Buy Now, Pay Later feature provides advantages to both customers and merchants.

While it’s crucial to consider the potential drawbacks and concerns associated with Afterpay’s business practices, such as the exploitation of young consumers and the use of customer data, it’s equally important to acknowledge the benefits it provides to its users and merchants.

Ultimately, whether investing in Afterpay is worthwhile depends on a variety of factors, including one’s risk tolerance, ethical considerations, and the overall outlook of the buy now, pay later industry. It’s advisable to conduct thorough research and seek professional advice before making any investment decisions.

Leave a Comment