E-commerce lender Afterpay to offer installment loans in stores

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The point-of-sale lender Afterpay, which got its start in the financing of online purchases, is now offering its installment loans to U.S. consumers shopping at brick-and-mortar retailers.

The arrival of an in-store option comes at a time when many traditional retailers are suffering from declining foot traffic because of the coronavirus pandemic. Afterpay says that allowing in-store shoppers to finance their purchases in four installments could help U.S. merchants boost their sales.

“We want to be in position to support them as they have an opportunity to ramp up and reopen,” said David Katz, the Australia-based company’s global chief product officer.

Skechers is among the retailers that will offer customers the option of paying for in-store purchases in installments using Afterpay's digital card.
Skechers is among the retailers that will offer U.S. shoppers the option of paying for in-store purchases in installments using Afterpay's digital card.

Afterpay is riding a boom in new borrowing options that threaten to take market share from the credit card industry. The mobile-centric lender has enjoyed rapid growth since entering the U.S. 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 enables shoppers to split transactions into four equal payments that are due every two weeks. Its customers — often young adults who are buying apparel or cosmetics — do not pay interest, though they may be charged a late fee if they miss a payment.

Retailers give Afterpay a little under 4% of the revenue they generate from the sales, CEO Anthony Eisen said during an interview in early March.

Afterpay’s in-store offering is a digital card that can be added to either Apple Pay or Google Pay. Once the card has been set up, customers can use it to make contactless payments at participating retailers, just as they would any other card in their mobile wallet. The user interface informs shoppers how much money they have available to spend and — once they’ve selected an item to purchase — how much each installment payment will be.

“We have a predominantly millennial and Gen Z base, and they demand strong mobile experiences,” said Alex Fisher, head of U.S. marketing at Afterpay.

The product has been in the works since before the coronavirus crisis and is currently available in pilot mode at certain U.S. stores. Upcoming launches are being planned at retailers such as Forever 21 and Skechers. Afterpay has been offering in-store financing in Australia since 2016, and says that about 40% of its active Australian customers use that option to pay at the cash register.

Certain other point-of-sale lenders have also made their financing available to shoppers in physical stores. San Francisco-based Affirm has been offering its installment loans in U.S. Walmart locations since early 2019.

Afterpay is one of several companies — others include Sezzle — in the nascent consumer finance segment known as buy now, pay later. Both Afterpay and the San Sezzle are publicly traded in Australia, where their share prices have soared during the pandemic. Unlike traditional lenders, the two companies have benefited from their heavy reliance on revenue from e-commerce.

Sezzle’s average monthly underlying merchant sales during the quarter that ended on June 30 reached $62.7 million, up from $39.8 million in the previous quarter, and up from $14 million in the same period a year earlier. The Minneapolis company announced a $55 million capital raise on Friday, saying that 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 that ended last month, which was up 62% from the three-month period that ended March 31.

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Consumer lending Point-of-sale Coronavirus