Afterpay Limited (abbreviated as Afterpay) is an Australian technology company and a
buy now, pay later
Buy now, pay later (BNPL) is a type of short-term financing that allows consumers to make purchases while only initially paying for a portion of their value, postponing payment of the remainder of the debt until a future date, or dividing it into ...
(BNPL) lender. Founded in 2014 by
Nick Molnar and
Anthony Eisen, it is now owned by
Block, Inc.
Block, Inc. (formerly Square, Inc.) is an American technology company and a financial services provider for consumers and merchants. Founded in 2009 by Jack Dorsey, it is the U.S. market leader in Point of sale, point-of-sale systems. As of 20 ...
As of 2023, Afterpay serves 24 million users,
processes US$27.3 billion in annual payments,
and ranks among the three most-used BNPL services globally.
Afterpay offers unsecured
installment loan An installment loan is a type of agreement or contract involving a loan that is repaid over time with a set number of scheduled payments; normally at least two payments are made towards the loan. The term of loan may be as little as a few months an ...
s allowing shoppers to make in-store or online purchases, and then repay with a fortnightly frequency. It does not charge fees or interest to the consumers, unless they miss scheduled repayments, and does not check or affect the
credit score
A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bu ...
s. The company charges merchants for offering its service, requiring that the charge is not passed on to shoppers.
As of 2024, Afterpay operates as a subsidiary of Block, Inc., following an acquisition in 2021, and maintains presence in the U.S., Australia, Canada, France, Italy, New Zealand, Spain and the U.K.
History
2014–2017: Founding; initial years
In April 2014, Molnar, a
Sydney
Sydney is the capital city of the States and territories of Australia, state of New South Wales and the List of cities in Australia by population, most populous city in Australia. Located on Australia's east coast, the metropolis surrounds Syd ...
-based jewelry salesman at the time, partnered with a product manager and an engineering manager in
Melbourne
Melbourne ( , ; Boonwurrung language, Boonwurrung/ or ) is the List of Australian capital cities, capital and List of cities in Australia by population, most populous city of the States and territories of Australia, Australian state of Victori ...
to design a financial product he had conceived. The concept targeted online retailers focused on sales growth and shoppers looking for a way to receive goods upfront while paying later. The resulting design offered two interest-free options for consumers, ensuring the product remained outside Australia’s credit regulations. The first, "Pay After Delivery", allowed users to wait 30 days before making a payment, similar to using a credit card. The second, "Pay Over Time", let users divide their bill into four installments over a maximum of 60 days.
Later, in October 2014, Molnar and his neighbor, Eisen, formerly a chief investment officer at the Australian holding company
Guinness Peat Group
Guinness Peat Group was an investment holding company with interests in Europe, Australia and New Zealand.
History
The company, which had been formed as an investment offshoot of London based investment bank Guinness Mahon in the 1980s, was acq ...
, co-founded Afterpay in their home in the suburb of
Rose Bay, Sydney. They pursued the repayment option involving four interest-free installments. As the company grew, Molnar began encouraging consumers to contact their favorite retailers and request that they offer Afterpay, resulting in an effective social media campaign.
On 4 May 2016, the company listed on the
Australian Securities Exchange
Australian Securities Exchange Ltd (ASX) is an Australian public company that operates Australia's primary Exchange (organized market), securities exchange, the Australian Securities Exchange (sometimes referred to outside of Australia as, or c ...
with an 25 million
IPO
An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investment ...
.
According to the
''Sydney Morning Herald'' in August 2016, Afterpay was being used at more than 300 retailers and had signed up more than 100,000 shoppers, financing $20 million worth of purchases in the quarter ending June 2016. Afterpay generated income from charging retail merchants, not customers, and Molnar claimed that "many customers" paid back money early. At that time, the
Consumer Action Law Centre
The Consumer Action Law Centre (CALC), also known as Consumer Action, is primarily a campaign-focused consumer advocacy organisation, but also acts as a community legal centre, providing free legal advice and pursuing litigation on behalf of vuln ...
, an Australian consumer advocacy organization, cautioned that although shoppers were not paying interest to the company, they might end up paying interest anyway.
In March 2017, Molnar stated that Afterpay had 2600 retail merchants on its platform and that the company was growing its presence into the physical stores of its retail partners. In October 2017, he said Afterpay had grown to serve more than one million customers and over 7000 retailers, adding "only 20 percent" of the company's revenue came from late fees, and "about 80 percent" came from retailers. Afterpay reportedly managed to avoid being subject to Australia's
national credit code, because the lender didn't charge interest and offered short-term credit to be repaid in less than 62 days.
2018–2019: U.S. and U.K. entry
In January 2018, American
venture capital
Venture capital (VC) is a form of private equity financing provided by firms or funds to start-up company, startup, early-stage, and emerging companies, that have been deemed to have high growth potential or that have demonstrated high growth in ...
fund
Matrix Partners
Matrix (formerly Matrix Partners) is a US-based venture capital investment firm. The firm invests in seed and early-stage companies in the United States and India, particularly in the software, communications, semiconductors, data storage, Int ...
announced its intention to invest 19.4 million in Afterpay to support its entry into the U.S. retail market. Afterpay was launched in the U.S. in mid-May 2018 with retailers such as
Anthropologie
Anthropologie is an Economy of the United States, American retailer operating in the U.S., Canada, France, Germany and the UK that sells clothing, jewelry, home furniture, decorations, beauty products, and gifts.
Anthropologie is part of Urban ...
,
Free People
Free People is an American bohemian apparel and lifestyle retail company that sells women's clothing, accessories, shoes, intimates, and swimwear. It also has a beauty and wellness category, which includes products such as cosmetics, skin, an ...
, and
Urban Outfitters
Urban Outfitters, Inc. (URBN) is a multinational lifestyle retail corporation headquartered in Philadelphia, Pennsylvania. Operating in the United States, the United Kingdom, Canada, select Western European countries, Poland, the United Arab Em ...
. In August 2018, Afterpay acquired 90 percent of the equity in "Clearpay", a U.K. based BNPL service, for a total consideration of one million Afterpay shares.
With reported underlying sales of 4.7 billion in the 11 months to May 2019, Afterpay raised 317.2 million in fresh capital through a share issue in June 2019, in part to help fund its international growth.
Two months later, the company revealed that it had over two million active users and 6,500 merchants in the U.S. and announced a strategic partnership with
Visa Inc.
Visa Inc. () is an American multinational payment card services corporation headquartered in San Francisco, California. It facilitates electronic funds transfers throughout the world, most commonly through Visa-branded credit cards, debit c ...
In its 2019 financial year update, the company announced that its growth in the U.K. was faster than that of the U.S., with more than 200,000 U.K. customers joining in the first 15 weeks.
This year also saw former
World Bank
The World Bank is an international financial institution that provides loans and Grant (money), grants to the governments of Least developed countries, low- and Developing country, middle-income countries for the purposes of economic development ...
Chief Economist
Larry Summers
Lawrence Henry Summers (born November 30, 1954) is an American economist who served as United States Secretary of the Treasury from 1999 to 2001 and as the director of the National Economic Council from 2009 to 2010. He also served as presiden ...
join Afterpay to advise it on its U.S. expansion.
2020: Growth during COVID-19 pandemic
On 21 May 2020, Afterpay announced that its operations had grown to five million active customers in the U.S. During the
COVID-19 pandemic
The COVID-19 pandemic (also known as the coronavirus pandemic and COVID pandemic), caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), began with an disease outbreak, outbreak of COVID-19 in Wuhan, China, in December ...
, many retailers closed physical stores and potential customers were increasingly hesitant to shop in-person. The ''
Australian Financial Review
The ''Australian Financial Review'' (''AFR'') is an Australian compact daily newspaper with a focus on business, politics and economic affairs. The newspaper is based in Sydney, New South Wales, and has been published continuously since its foun ...
'' commented that the company's growth was spurred by "investors
hoare seeking exposure to e-commerce as the coronavirus crisis pushes more shopping online, and continuing government stimulus will keep bad debts low”. In 2020, Afterpay unveiled plans to expand its services to at least four continents, including Asia, to capitalize on the online shopping surge brought by the COVID-19 pandemic.
This plan would entail the acquisition of
Singapore
Singapore, officially the Republic of Singapore, is an island country and city-state in Southeast Asia. The country's territory comprises one main island, 63 satellite islands and islets, and one outlying islet. It is about one degree ...
-based,
Indonesia
Indonesia, officially the Republic of Indonesia, is a country in Southeast Asia and Oceania, between the Indian Ocean, Indian and Pacific Ocean, Pacific oceans. Comprising over List of islands of Indonesia, 17,000 islands, including Sumatra, ...
-focused buy-now-pay-later service EmpatKali.
Over the eleven months following March 2020, Afterpay's share price rose from A$9 to A$160. This period also saw an investment of A$300 million, paid in May 2020, from the Chinese company
Tencent
Tencent Holdings Ltd. ( zh, s=腾讯, p=Téngxùn) is a Chinese Multinational corporation, multinational technology Conglomerate (company), conglomerate and holding company headquartered in Shenzhen. It is one of the highest grossing multimed ...
in return for a 5 per cent equity stake in the lender. Afterpay had not delivered a profit or paid out any dividends by this time.
2021–present: Acquisition by Block, Inc.; other updates
By June 2021, Afterpay was available at nearly 100,000 merchants globally.
It was estimated that the company's average customer in Australia was 33 years old and eight of ten customers were women.
In August 2021, Afterpay and Block, Inc. (then named "Square, Inc."), announced that Afterpay would be acquired by Block. Square paid Afterpay 39 billion (US$29 billion) in stock for the acquisition.
Afterpay said its underlying sales rose 90 per cent over the 2021 financial year, to A$21.1 billion and that the number of customers actively using the platform rose to 16.2 million, up from 9.9 million in June 2020. The lender operated in Australia, the U.S., Canada and New Zealand, as well as in the U.K., France, Italy and Spain as Clearpay by this time.
It was also reported that Molnar and Eisen would lead Afterpay's merchant and consumer businesses inside Block.
Shares of Afterpay, listed in Australia, closed higher after the acquisition news. According to
Yahoo Finance
Yahoo Finance is a media property that is part of the Yahoo network. It provides financial news, data and commentary including stock quotes, press releases, financial reports, and original content. It also offers online tools for personal fina ...
in October 2021, Afterpay was among the top two most popular BNPL services in the U.S. In November 2021, Afterpay announced that they would launch BNPL for subscriptions, such as for gym memberships and entertainment subscriptions, to U.S. customers.
On January 12, 2022, the
Bank of Spain
The Bank of Spain (, ) is the national central bank for Spain within the Eurosystem. It was the Spanish central bank from 1874 to 1998, issuing the peseta. Since 2014, it has also been Spain's national competent authority within European Banki ...
approved Block's takeover bid of Afterpay, marking the final hurdle in the acquisition merger. On January 19, 2022, Afterpay suspended trading of its shares on the
ASX.
On January 20, 2022, the merged entity trading as
Block
Block or blocked may refer to:
Arts, entertainment and media Broadcasting
* Block programming, the result of a programming strategy in broadcasting
* W242BX, a radio station licensed to Greenville, South Carolina, United States known as ''96.3 ...
commenced trading on the ASX under the ticker SQ2.
On January 31, 2022, Block completed the acquisition of Afterpay, officially making it a subsidiary.
In 2023,
Bank of America Securities
The Bank of America Corporation (Bank of America) (often abbreviated BofA or BoA) is an American multinational investment bank and financial services holding company headquartered at the Bank of America Corporate Center in Charlotte, North Ca ...
identified Afterpay as the leading BNPL service in the U.S. and one of the top three BNPL services globally, both rankings based on monthly active users.
In February 2024,
''Axios'' reported that Afterpay contributed US$1.04 billion in revenue and US$755 million in gross profit to Block in 2023, while processing US$27.3 billion in payments.
According to ''
Radio New Zealand
Radio New Zealand (), commonly known as RNZ or Radio NZ, is a New Zealand public service broadcaster and Crown entity. Established under the Radio New Zealand Act 1995, it operates news and current affairs station, RNZ National, and a classi ...
'' in July 2024, Afterpay reported having 24 million global customers as of December 2023 and stated that 95% of customer repayments were made on time during January–March 2024.
In November 2024, ''
City A.M.
''City AM'' is a free business-focused newspaper distributed in and around London, England, with an accompanying website. In January 2025, it had a monthly online readership of 4m. In 2023 it had a print circulation of 67,714.
History
''City ...
'' reported that Afterpay claimed a merchant base of 348,000 in five countries and that Molnar was promoted in August 2024 to become Block's "head of sales".
Business model
Afterpay offers unsecured installment loans to shoppers. Its loans allow consumers to immediately make in-store and online purchases and repay the loan with fortnightly frequency. Borrowers are permitted to make 4 installment payments spread over 6 weeks, including one down payment (typically worth 25% of the order).
The repayments are interest-free, but if they are not paid every two weeks as required, late fees of (in Australia) $10 per indiscretion are incurred.
Afterpay bears the risk of default by the consumer. The lender's income consists of payment processing fees and late payment fees.
Afterpay does not charge fees to shoppers who use the service, unless they miss their scheduled payments. It does, however, charge merchants for offering its service in store or online, and stipulates the charge cannot be passed on to shoppers.
Afterpay doesn’t perform a credit check when approving consumers. Rather, it uses a proprietary risk model to assess customers, including looking at the value of the order (a lower order value may be more likely to be approved), the amount of funds the consumer has on their debit or credit card, and the length of time they have been using Afterpay. The lender rejects about 20% of transactions based on creditworthiness. In 2020, it had to write off less than 1% of sales due to customers not paying back. Afterpay does not report to the credit bureaus, leaving the borrower's credit score unaffected.
Impact, criticism and regulation
The rise of
BNPL
Buy now, pay later (BNPL) is a type of short-term financing that allows consumers to make purchases while only initially paying for a portion of their value, postponing payment of the remainder of the debt until a future date, or dividing it into ...
services such as Afterpay has been cited as a cause of decreasing
credit card use in Australia.
Millennials
Millennials, also known as Generation Y or Gen Y, are the demographic cohort following Generation X and preceding Generation Z. Researchers and popular media use the early 1980s as starting birth years and the mid-1990s to early 2000s a ...
are Afterpay's main customer demographic, accounting for 75% of all users. Another significant segment of Afterpay's customer base is university students, of which one third have been found to use short-term borrowing.
Afterpay has also been criticized as being harmful to consumers. Studies have found that in order to keep up with payments, some users experience financial stress, incurring debt and neglecting essential needs.
Market commentators suggest that while BNPL payment options (such as Afterpay and its competitors) are showing significant upside for investors, such growth may not be sustained unless the company continues to show that it is able to generate larger basket sizes (i.e., extra sales that consumers would not otherwise have made).
In 2018, Afterpay announced it earned 24.4% of its income from late fees and 75.6% from merchant fees. From 2018 to 2019, the number of credit card accounts dropped nearly 5% from 16.7 million to 15.89 million, with 69% of millennials using their credit card less as a result of Afterpay.
In April 2019, legislation was passed to provide the
Australian Securities & Investments Commission
The Australian Securities and Investments Commission (ASIC) is an independent commission of the Australian Government tasked as the national corporate regulator. ASIC's role is to regulate company and financial services and enforce laws to pro ...
(ASIC) with "Product Intervention Powers" (PIP). These powers provide ASIC with authority to intervene where it identifies a risk of significant detriment to retail consumers (including those using BNPL services like Afterpay). Afterpay supported the introduction of these powers as a way to provide regulatory oversight and protect consumers. In June 2019, the company disclosed that it was under probe by
AUSTRAC
Australian Transaction Reports and Analysis Centre (AUSTRAC) is an Australian government financial intelligence agency responsible for monitoring financial transactions to identify money laundering, organised crime, tax evasion, welfare frau ...
for potential breaches of the
Anti-Money Laundering and
Counter-Terrorism
Counterterrorism (alternatively spelled: counter-terrorism), also known as anti-terrorism, relates to the practices, military tactics, techniques, and strategies that governments, law enforcement, businesses, and intelligence agencies use to co ...
Financing Act 2006 (AML/CTF regulations). The company was said to be "in dialogue" with the regulators, and the outcome of the probe has yet to be determined. AUSTRAC, upon identifying several concerns with its compliance, ordered the appointment of an external
auditor
An auditor is a person or a firm appointed by a company to execute an audit.Practical Auditing, Kul Narsingh Shrestha, 2012, Nabin Prakashan, Nepal To act as an auditor, a person should be certified by the regulatory authority of accounting an ...
at Afterpay's expense to examine its compliance with the AML/CTF regulations.
PRObono Australia said in 2019 that it was "putting vulnerable young people into vicious cycles of debt that follow them long after they stop spending". Despite this negative press, in 2019, it was reported that 95% of payments had not incurred a late fee.
In February 2020, Afterpay was reported to have 3.6 million active customers in the U.S., 3.1 million in Australia and New Zealand, and 600,000 in the U.K.
In November 2020, the ASIC released a report on the BNPL industry, highlighting the need for consumer protections via existing and impending regulatory changes, yet did not call for any new regulation.
The Australian Finance Industry Association'
Code of Practice which came into effect on 1 March 2021, is voluntary, so it does not have the teeth of
financial regulation
Financial regulation is a broad set of policies that apply to the financial sector in most jurisdictions, justified by two main features of finance: systemic risk, which implies that the failure of financial firms involves public interest consi ...
.
BNPL platforms charge no interest to its customers, and hence are not subject to Australia's Credit Act.
However, during June 2022, the
Albanese Government
The Albanese government is the current federal executive government of Australia, led by Prime Minister Anthony Albanese of the Labor Party. The Albanese government was sworn in on 23 May 2022 by the Governor-General of Australia, David Hurl ...
announced that it planned to regulate the BNPL sector under the Credit Act.
In November 2023, Afterpay came under fire on ''
A Current Affair
''A Current Affair'' may refer to:
* ''A Current Affair'' (Australian TV program), 1971–present Australian current affairs program that airs on Nine Network
* ''A Current Affair'' (American TV program), a 1986–1998 American television news ...
'' for holding funds from allegedly high-risk businesses, causing a
liquidity crisis
In financial economics, a liquidity crisis is an acute shortage of ''liquidity''. Liquidity may refer to market liquidity (the ease with which an asset can be converted into a liquid medium, e.g. cash), funding liquidity (the ease with which borrow ...
for many small businesses. Small businesses are at a particularly high risk of having their cash reserves depleted due to delayed payment from Afterpay, often as much as three months. Afterpay's use of a 'rolling reserve' means that individual businesses can be out tens of thousands for up to three months, with these funds only gradually released in the form of
micropayment
A micropayment is a financial transaction involving a very small sum of money and usually one that occurs online. A number of micropayment systems were proposed and developed in the mid-to-late 1990s, all of which were ultimately unsuccessful. A s ...
s e.g. $50 at a time, but not the interest on these funds. Customer use of Afterpay is so high for some businesses, however, that opting out may translate to significant lost business.
Notes
*: ''
Guardian Australia
''Guardian Australia'' is the Australian website of the British global online and print newspaper, ''The Guardian''.
Available solely in an Online newspaper, online format, the newspaper's launch was led by Katharine Viner in time for the 201 ...
'' reported that Afterpay raised 125 million to list on the ASX; however, 25 million was raised.
References
External links
*
{{authority control
Australian companies established in 2013
Financial services companies established in 2013
Financial technology companies
Online financial services companies of Australia
Companies based in Melbourne
Block, Inc.
Software companies of Australia
Australian brands
Australian subsidiaries of foreign companies
Companies listed on the Australian Securities Exchange
Companies in the S&P ASX 50
Financial software companies
2022 mergers and acquisitions