GlobalData Plc

Industry Interview: AfterPay

The online payments market in the Netherlands is heavily dominated by iDEAL, with a 51% share of all online commerce by value in 2014. Despite the presence of such a large player, some new companies have managed to successfully break into the market: one such player is AfterPay. Senior Consumer Payments Analyst Sam Murrant spoke with AfterPay founder and CEO Stefan van den Berg concerning its pay-after-delivery service.

Could you give me a bit of background on AfterPay?

AfterPay has been around since 2005 – we started out as part of a collection agency, but we really launched as an online payments service in 2010 when we became an independent start-up instead of a credit management service. We specialize in pay-after-delivery services, allowing customers to make payments via invoice after the goods are delivered. From the start AfterPay has focused on customer engagement by offering a consumer-friendly, seamless “pay-after-delivery” payment brand, AfterPay. AfterPay offers consumers the ability to pay these invoices via the payment method of their choice, and is currently integrated with two thirds of the e-commerce industry players and payment service providers in the Netherlands.

Our consumer payments service became a leading Dutch brand in 2012, and we launched our services in Belgium in 2013. After being acquired by arvato Financial Solutions in 2014, we’ve expanded to the Nordics and Germany. Currently, AfterPay has 1.5 million active users and is roughly comparable in size to PayPal in the Dutch market, with about a 6% share of all online transactions by volume in the Netherlands (excluding the travel and hotel sectors).

Is there a lot of demand for pay-after-delivery services?

Our research suggests that 30% of Dutch consumers prefer to pay after delivery, for a number of reasons including ease of use, being able to check the product before having to pay, and budget planning. Security is the most important reason consumers use AfterPay – if a consumer selects the AfterPay option at checkout they don’t have to enter their private payment details online, and they can be sure of receiving the goods they pay for.

On the merchant side AfterPay provides a full end-to-end service. AfterPay bears the risk of non-payment (based on our credit scoring application) as we guarantee payout and no charge-backs for our merchants after we’ve approved a customer for AfterPay use. Customers are approved in realtime based on our credit scoring application. We also take care of all AfterPay-related communication with customers from a consumer-central viewpoint. Customer-friendliness is one of our key success factors. AfterPay settles with its merchants in 14-30 days.

iDEAL is a pretty big player in the Dutch market – how do you compete with that?

iDEAL isn’t really a competitor of ours actually – AfterPay users can pay their invoices using iDEAL, in fact! We don’t have our sights set on the wider e-commerce market as we’re pay-after-delivery specialists, so we serve a different need to providers that cater to consumers who pay when ordering goods.

Our biggest direct competitor would probably be Klarna, which is another pay-after-delivery provider. Our strategy for competing with other pay-after-delivery providers is based on brand recognition and customer-centric services. Every merchant that accepts AfterPay has to display an AfterPay button on their website and as a result 58% of Dutch consumers are aware of our brand. We’re also creating positive brand associations through our convenient user experience for consumers and through our dedicated merchant support and quick, easy merchant on-boarding.

Interesting – what are your ambitions for AfterPay in the next few years?

We’ve got ambitious plans for our future. Thanks to our parent company arvato Bertelsmann we’ve been able to expand from the Benelux region to other parts of Northern and Central Europe and we’re aiming to continue that growth by expanding into Poland, Austria, Switzerland, and Asia in 2016 and 2017. We’re also planning to launch a mobile payments app later in 2016, which will allow consumers to make purchases at the point of sale using NFC technology.

By Samuel Murrant, Senior Consumer Payments Analyst

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