As e-commerce boomed during the COVID-19 pandemic, more consumers than ever turned to digital payment options. With physical stores reopening, consumers are still looking for digital tools to make flexible payments as e-commerce continues to expand, with online sales up 39% in Q1 2021 year-over-year, according to Afterpay.
Afterpay (OTC: AFTPY), one of the leaders in the “buy-now, pay-later,” space, has inked deals with 13 major retailers to allow its customers to take advantage of delayed payment options when purchasing items.
“Over the past year, we all relied on online shopping for the things we needed during the pandemic. But, as we celebrate the physical reopening of stores, consumers still want the convenience and flexibility of buying with the click of a mouse as part of their ‘new normal,’” said Zahir Khoja, general manager of Afterpay North America.
Amazon (NASDAQ: AMZN), CVS (NYSE: CVS), Dell (NYSE: DELL), Kroger (NYSE: KR), Macy’s (NYSE: M), Nike (NYSE: NIKE), Nordstrom (NYSE: JWN), Nordstrom Rack, Sephora, Target (NYSE: TGT), Victoria’s Secret, Walgreens (NASDAQ: WBA) and Yeti combined represent nearly half of all e-commerce volume in the country. Now, Afterpay app customers can use the app at any of these stores.
Founded in 2014, Afterpay allows consumers to buy and receive an item immediately with only a 25% upfront cost. The remainder of the purchase price is repaid, interest-free, over the next six weeks in four equal payments. Customers with late payments are not allowed to use the app for another purchase until the debt is settled, but Afterpay notes that this prevents customers from running up large debt as occurs with credit cards.
The average transaction using the Afterpay app is $155. There are no monthly fees or other charges to the consumer. Afterpay pays the merchant for the items upfront and then collects a small fee from the merchant for the service. Afterpay said it provides 31 million leads on average each month to its merchant customers from its Shop Directory, which is where most of its customers begin their shopping journey.
Buy-now, pay-later services have grown in popularity as consumers look to delay payments as they manage income uncertainties. Earlier this month, Softbank led a $639 million funding round into a competitor of Afterpay, Klarna, valuing the Swedish company at $45.6 billion.
“Consumers continue to reject interest- and fee-laden revolving credit and are moving toward debit while simultaneously seeking retail experiences that better meet their needs,” Sebastian Siemiatkowski, Klarna’s founder and CEO, said in a statement at the time.