Afterpay Credited With Boosting Aussie Online Retail Growth
Buy Now, Pay Later (BNPL) service Afterpay has helped bolster online sales in Australia, eBay boss Tim MacKinnon says.
After the two companies struck a deal in April that saw Afterpay added as a payment option at the checkout in Australia, Mackinnon claims sales have improved significantly.
While he did not discuss exact sales figures, Mackinnon said the partnership “helped bring forward spending decisions for people, improved basket sizes and driven a bit more conversion”, reports the Australian Financial Review.
Afterpay co-CEO Nick Molnar said he is keen to extend the partnership internationally in the US, where eBay uses another BNPL service named Bill Me Later, which is a subsidiary of Paypal.
“Core to our strategy has been leveraging our partners in all parts of the world to expand globally and once retailers see the value Afterpay has been able to derive in a particular region, the natural extension of that conversation is how do we work more together,” Mr Molnar said.
eBay has over one billion listings from 40,000 Australian retailers and the company has chosen to absorb the Afterpay fees which are usually charged to merchants, around 10% of the sale price.
After COVID-19, Afterpay and eBay found the average price point where shoppers will make an instant purchase has risen from $190 to $230.
Other online retailers have partnered with BNPL firms, including Amazon Australia which inked a deal with Zip in November 2019. Kogan also offers Afterpay.
There has been a harsh spotlight on BNPL services in Australia recently, with the Reserve Bank looking into whether the schemes effectively operate as thinly veiled credit card providers.
However the RBA said companies such as Afterpay will be able to continue to insist merchants do not pass instalment payment fees onto customers – at least for now.
RBA governor Phillip Lowe said the surprise stance was due to the benefits instalment products bring to consumers and the small overall volume transactions made in comparison to existing payment methods, like credit cards.
Major retailers in Australia, including Bunnings, JB Hi-Fi and now even airlines, have offered BNPL services to customers in a bid to capture shoppers who do not use credit cards.
During a speech to the AusPayNet event, Dr Lowe said the regulation review found the BNPL operators “have not reached the point where it is clear the costs arising from the no-surcharge rule outweigh the potential benefits in terms of innovation”, according to the Australian Financial Review.