Afterpay

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Afterpay Touch Group
Afterpay-logo.svg
Type of businessPublic
Type of site
Financial technology
Traded asASXAPT
Founded2015; 4 years ago (2015)
HeadquartersMelbourne, Victoria, Australia
Area servedAustralia, New Zealand, United States, United Kingdom
Key people
IndustryFinancial technology
RevenueIncrease $AU 113.9 million (2018)[1]
Subsidiaries
  • Touchcorp Limited
  • Afterpay US, Inc.
  • Afterpay Pty Ltd
  • Clearpay Finance Limited
Websitewww.afterpay.com
UsersIncrease 3.1 million (2019)
Current statusActive
Native client(s) on

Afterpay Touch Group Limited (abbreviated as Afterpay or APT) is an Australian financial technology company operating in the United States, United Kingdom, Australia and New Zealand. Afterpay and Touchcorp merged in June 2017 to form Afterpay Touch Group.[2] Since the merger, Afterpay Touch Group has emerged as a leader in the "buy now pay later" (BNPL) industry.

Business[edit]

Subsequent to the merger, Afterpay's business operations consist of "pay now" and "pay later" business segments. Its pay later business enables retailers to offer their customers the facility to buy now and pay later without requiring traditional credit, upfront fees or interest allowing customers to have the ability to make purchases now and pay for them in four equal payments made every fortnight without any interest. There is no interest charged to customers for using this service. However, failure to make their payments will result in a late fee. Customers are required to be over eighteen years of age to use the service.

The pay now business consists of the Touch System Platform, which includes services related to fraud protection, regulatory compliance, and data collection and analysis for digital payments.[3]

Expansion[edit]

In January 2018, US venture capital fund Matrix Partners announced its intention to invest $AU19.4 million in Afterpay to support its entry into the US retail market, which was worth US$3.8 trillion in total annual turnover, including $US450 billion in online purchases. Afterpay launched in the US in mid-May 2018 with retailers such as Urban Outfitters, with over US$11m of underlying sales was processed in the first full month in June 2018.[4]

In August 2018, Afterpay entered into a share purchase agreement to purchase Clearpay, a UK based buy now pay later subsidiary of Thinksmart. Under the Agreement, Afterpay acquired 90% of the equity in Clearpay for total consideration of 1 million Afterpay shares. Afterpay has the option to purchase the remaining 10% in any time 5 years subsequent to the purchase.[5] In June 2019, Afterpay announced that it had launched in the UK under the Clearpay brand.[6][7]

Criticism and regulation[edit]

Some news outlets have ousted Afterpay as a scheme, one stating that is putting vulnerable young women into vicious cycles of debt that follow them long after they stop spending.[8]

Additionally, market commentators suggest whilst buy now pay later payment options (such as Afterpay and its competitors) are showing significant upside for Australian retail sales, they may be unable to sustain such growth they continue to show they are able to generate larger basket sizes (i.e., extra sales that consumers would not otherwise have made).[9]

A report from ASIC revealed that Afterpay earned 24.4% of its income from late fees — and 75.6% from merchant fees.[10] Critics have argued that the service may cause financial stress and the accumulation of debt.[11] Despite this, 95% of payments have not received a late fee.[12] Following this, in April 2019, legislation was passed to provide ASIC with 'Product Intervention Powers' (PIP). These powers provide ASIC the authority to intervene where it identifies a risk of significant detriment to retail consumers (including those using BNPL services like Afterpay).[13][14] The company supported the introduction of these powers as a way to provide regulatory oversight and protect consumers.[15]

In June 2019, Afterpay disclosed that it was under probe by AUSTRAC for potential breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF regulations). The company is "in dialogue" with the regulators and the outcome of the probe has yet to be determined.[16] AUSTRAC upon identifying several concerns with its compliance, then subsequently ordered the appointment of an external auditor at Afterpay's expense to examine its compliance with the AML/CTF regulations.[17][18]

Competition[edit]

Afterpay has a number of competitors including Zippay, Klarna, Splitit and Sezzle.[19][20]

References[edit]

  1. ^ "Afterpay Touch Group Annual Report FY2018" (PDF). www.afterpaytouch.com. Afterpay Touch Group. August 2018.
  2. ^ Simmons, David. "AFTERPAY AND TOUCHCORP MERGER IS NOW COMPLETE". Business News Australia. Business News Australia. Retrieved 31 March 2019.
  3. ^ Bourlioufas, Nicki. "Afterpay's US Foray Carries High Expectations". FN Arena. FN Arena. Retrieved 31 March 2019.
  4. ^ Faint, Paris. "Afterpay lands in the US, keen for a slice of $3.8 trillion market". Business News Australia. Retrieved 1 April 2019.
  5. ^ "International Expansion Progresses and Capital Raising" (PDF). ASX Announcement. Afterpay. Retrieved 1 April 2019.
  6. ^ Baird, Roger. "Afterpay fine tunes UK expansion". Altfi. Altfi. Retrieved 1 April 2019.
  7. ^ Wightman-Stone, Danielle. "Afterpay Touch Group launches 'Clearpay' in the UK". Fashion United. Retrieved 7 June 2019.
  8. ^ Michael, Luke. "Journalist". probonoaustralia.com.au. PRObono Australia. Retrieved 14 March 2019.
  9. ^ Mitchell, Sue. "Retailers face Afterpay hangover, says UBS". Australian Financial Review. Australian Financial Review. Retrieved 31 March 2019.
  10. ^ Chau, David. "Afterpay's late fees make up 24pc of its income; ASIC recommends buy now, pay later law reform". ABC. Retrieved 10 September 2018.
  11. ^ McGowan, Michael. "Afterpay: buy-now pay-later scheme soars in popularity but experts sound warning". The Guardian. Retrieved 10 September 2018.
  12. ^ Boyd, Tony. "Afterpay regulatory risks fading". Financial Review. Retrieved 4 February 2019.
  13. ^ Bindi, Tas. "ASIC's new product intervention powers becomes official". The Adviser. Retrieved 7 June 2019.
  14. ^ "Design and Distribution Obligations and Product Intervention Powers legislation has been passed". Hall and Wilcox. Retrieved 7 June 2019.
  15. ^ "Business Update (6 June 2019)" (PDF). Afterpay Investor Centre. Retrieved 7 June 2019.
  16. ^ Kruger, Colin. "Austrac scrutinising Afterpay over anti-money laundering compliance". Sydney Morning Herald. Sydney Morning Herald. Retrieved 7 June 2019.
  17. ^ "AUSTRAC orders audit of Afterpay's compliance with financial crime legislation". AUSTRAC. Retrieved 13 June 2019.
  18. ^ Han, Misa; Shapiro, Jonathan (13 June 2019). "AUSTRAC orders Afterpay to hire external auditor". The Australian Financial Review. Retrieved 13 June 2019.
  19. ^ ""Shop Now, Pay Later" is Becoming a Major Ecommerce Trend". www.americaneagle.com. Retrieved 30 November 2018.
  20. ^ Ayers, James. "Afterpay's quest to be the global platform connecting retailers with Millennials". Australian Financial Review. Australian Financial Review. Retrieved 31 March 2019.

External links[edit]