The pandemic has been a boon for Afterpay’s business.
Upon crossing the 5 million active shopper mark in the U.S., the installment payments platform provider revealed that more than 1 million new customers started using the platform since March 1, just as the COVID-19 pandemic broke loose in the U.S. On a week-by-week basis, the growth represents a 30 percent to 40 percent increase in user growth rates seen in January and February.
Afterpay chief revenue officer Melissa Davis noted that the company has helped retailers craft their responses to the crisis—especially by helping small businesses take advantage of the massive shift to e-commerce.
“We have seen small businesses shift their focus to their online presence and strategies during the period, which includes offering new and engaging ways for consumers to pay,” Davis said. “This has resulted in a spike in inquiries to Afterpay, with lead volume up over 25 percent in March and April compared to early in 2020.”
According to Doxoinsights’ May survey of 3 million consumers, 82 percent are worried about making ends meet until the economy begins to recover. By that logic, shoppers navigating a distressed economy may not be comfortable paying for certain goods, especially if they’re discretionary nice-to-haves beyond necessary essentials. When it comes to their credit, 40 percent of shoppers say they will start paying off their credit with installments or will decrease their usual payments if they already carry a month-to-month balance. Given the willingness to pay in installments, there’s a large segment of consumers that would likely lean further toward making a retail purchase if prompted with the option to space out their outlay.
“Consumers are always looking for more flexibility, but especially right now with things being so uncertain,” Davis said. “They want payment options that help them stay on budget and avoid high-interest debt, but at the same time, offer convenient, secure and transparent ways to pay without fees. Afterpay’s data has shown a significant shift to debit over the COVID-19 period, beginning in March, now with 90 percent of consumers electing to use their debit card to pay for their installments.”
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The “buy now, pay later” platform provider assisted merchants in processing $2.4 billion year to date through the third quarter of its 2020 fiscal year, which ended March 31, marking a significant 354 percent increase over the same period in the year before.
“Our brand partners see an immediate increase in conversion rates—typically anywhere from 20 percent to 30 percent higher than other payment methods, along with increased basket sizes,” Davis said. “We also have the lowest return rate among all payment types for fashion (four to six percentage points lower than debit and credit cards), which is especially critical right now with minimal staffing with shipping companies and warehouses. And lastly, brands see an increase in referrals through the Afterpay platform.”
In April, Afterpay’s U.S. Shop Directory contributed nearly 10 million lead referrals to its retail partners. Worldwide, the company saw more than 15 million app and site visits.
More than 15,000 brands and retailers are offering, or in the process of offering, Afterpay to their customers, who can now shop American Eagle/Aerie, Birkenstock, Furla, Herschel, Lancer Skincare, Marc Jacobs Beauty, Perricone MD, Soko Glam and The Hut Group and Tilly’s and pay later for purchases.
As far as delivering strategies designed to assist shoppers and retailers during the COVID-19 pandemic, communication ultimately is key to increasing brand awareness and delivering any form of success, Davis said.
“Frequent, relevant updates to consumers and merchants not only keep our brand top of mind, but encourage dialogue,” Davis said. “We have an amazing customer service team who are available to our customers to answer any questions or concerns they may have in navigating their payments. And equally our business development and client service team have been in regular communication with retailers to ensure they’re supported during this period. We’ve also found it is important to highlight the good happening right now. Afterpay launched a social campaign highlighting brands doing good on our social platforms to share their good work with consumers and encourage them to participate.”
Even as stores begin to reopen worldwide, the Afterpay team is ready to stay in growth mode, both in terms of expanding its consumer and merchant bases. With more consumers getting used to shopping online and remaining conscious of their spending, Davis expects the Afterpay growth trajectory to continue well into 2020.
“Customers have really turned to e-commerce during the pandemic and this is something that we don’t expect to decrease, even with stores opening,” Davis said.