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Afterpay: Will it affect conversions? - Lumos Marketing

Afterpay is essentially a buy now, pay later merchant service that offers a credit alternative to handing over cold hard cash right at the checkout, interest-free. And it isn’t just online that shoppers are given the option to take home their goods without payment – physical bricks and mortar stores are now offering Afterpay payments over the counter through the Afterpay App.

Regardless of whether you have chosen to use Afterpay or not, there is no denying that it is quickly making waves in the E-Commerce world – whether we a choose to use it or not. As of the start of this year, over 1 million customers are using it with an 86% repeat level of business.

Afterpay makes some hefty conversion rate claims, bragging a conversion rates increase of 22% for fashion retailers like Veronika Maine, 25% for General Pants, 10% increase for Cue and 15% for Princess Polly. They also claim a significant increase in average order value: from 20 – 65%.

So how does Afterpay work?

If you haven’t had a chance to test Afterpay out for yourself yet, it starts with your shopping cart (or checkout counter now in some bricks-and-mortar stores), the customer pays for the purchase using their Afterpay account, receives the goods and pays off the purchase in 4 interest-free instalments over the next 8 weeks.

As a merchant, you receive the payment upfront whilst Afterpay assumes the credit and fraud risk. (for a hefty price of 4-6% per transaction) So once a transaction has been completed, the debt-collection is out of your hands. You receive the money and pay their flat fee and commission. Percentage of customers who never pay (according to Afterpay) is 2.2% which they claim is primarily fraud driven.

So what do you have to lose by implementing this service?

Firstly, there is no upfront cost to set up Afterpay. So when you start collecting revenue, you start paying for the service. Merchants are charged 30c plus 4 – 6 % commission on every sale.

Secondly, with over 7,200 retailers on board, processing approximately 20% of online fashion retail sales and 5% of total online retail sales in Australia, the chances of your competitors offering this service is high – and may leave you missing out on sales from Afterpay-shoppers looking for the service.

Also, its success in the Australian Fashion industry has been somewhat skewed to higher dollar-value items. If the average price of your goods and services is quite small – it may not have an impact on your sales at all. But does that mean you shouldn’t give you customers the option?

Is Afterpay right for your business? Before you sign up, consider the following:

  • 75% of Afterpay’s customer base is comprised of millennials. Are millennials part of your customer base?
  • After pay is also heavily female focused, with the Financial Review attributing high growth for the merchant in 2017 to the number of female, Millennial clothes shoppers.
  • Will Afterpay substitute lower-fee, existing payment methods for your customers?
  • Does your current e-commerce platform support Afterpay?
  • What is the average price of your products and will Afterpay have a significant impact?
  • Does Afterpay suit BOTH your needs and the customer needs?
  • What are your direct competitors offering in terms of buy-now pay-later services?
  • Will the 4-6% commission remove too much profit margin from your operation?


All these to consider and more before implementing Afterpay for your business.

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