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Is Afterpay good for business? Pros and cons for merchants

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedJune 20232 min read

The buy now, pay later (BNPL) market shows no signs of slowing, with Afterpay one of the biggest services. Australians spent over $63.8 billion from online retailers in 2022, and over a quarter of shoppers said they used BNPL services like Afterpay at checkout. It’s clear that consumers like using it, but is Afterpay good for business? We’ll explore a breakdown of the positives and pitfalls associated with this type of service, so that you can decide if Afterpay for business is worth it.

How does Afterpay work for business?

First, a quick rundown of how it works. Like other buy now pay later companies, Afterpay lets customers break down the total cost of their purchase into a series of interest-free installment payments. These are paid directly by the consumer to Afterpay, but the service pays your business for merchandise up front. The Afterpay option is presented to customers at checkout, alongside the usual payment methods like credit and debit cards.

The signup process for retailers is simple. To get started, you’ll fill out an enquiry form with your business details. You can expect to provide information including:

Your ABN
POS platform
Average order value
Total annual sales
Industry and business details

The service works both in-store and online, making it a suitable option for many different types of businesses. It integrates with most major POS and ecommerce platforms including Magento, Shopify, Neto, Infinity, and others.

What are the Afterpay business fees?

When a customer makes a purchase using Afterpay, the service pays your business for the merchandise. However, there are fees involved. You’ll pay:

$0.30 fee per transaction
Commission fee per transaction ranging from 4-6%

While the per-transaction fee of $0.30 is comparable to most other payment gateways, the added commission fee takes a significant cut out of your profit.

Pros and cons of Afterpay for retailers

So, are the high fees worth it? There are certainly advantages to consider. The major benefit of Afterpay for retailers is its ability to generate more sales. According to Afterpay’s own studies, it attracts new customers while increasing the average order value by up to 18%. Afterpay customers are enticed to spend more per transaction and are more likely to return for additional purchases. As with other BNPL services, Afterpay provides additional benefits including:

Easy payment plans with pre-agreed installments make it easier for customers to afford a purchase.
Flexible payment plans help you attract new customers, who are more likely to make a purchase.
Afterpay is a trusted name both in Australia and worldwide, facilitating international transactions.
Businesses receive upfront payment for purchases.
Afterpay assumes all risk of non-payment, so you don’t have to chase up on late payments.

The major downside to Afterpay are its fees. Taking 4% out of your sales can add up to a significant amount over time. Another factor to consider is the approval process for customers. The service’s automated system sets spending limits for new customers, to help encourage responsible spending. This can keep them from making larger purchases without access to credit.

The bottom line: Is Afterpay good for business?

If you’re looking for a way to boost sales and attract new customers, adding Afterpay to your checkout page could be beneficial. It’s always a good idea to cater to as many customer payment preferences as possible to prevent abandoned shopping carts. With high commission fees, however, it can become problematic if a high percentage of your customers use Afterpay to make all purchases.

As with any payment system, it’s a good idea to review your sales figures and expenditures carefully at regular intervals. Track the percentage of Afterpay sales over time to get a better idea of its long-term impact on your profits. For a low-cost way to offer your customers more choice at checkout, try GoCardless. We offer a convenient direct debit solution suitable for recurring and one-off payments, all without any costly commissions.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.