Buy-now-pay-later service Afterpay enjoyed its best-ever quarter as locked-down shoppers flocked to alternative payment services during the pandemic.
Shoppers around the world used the service to purchase $3.8 billion worth of goods and services in the three months to the end of June.
Most of that money ($2 billion) came from Australian customers, while $1.6 billion came from Afterpay’s US customers.
The record-breaking $3.8 billion sum represents a 127 per cent increase in underlying sales compared with the same period last year.
And the company saw a similar lift in new users, with the number of active global customers jumping from 4.6 million on June 30, 2019 to 9.9 million customers a year later, an increase of 116 per cent.
Between April 1 and June 30, the business received an average of 20,500 new customers on a daily basis.
Speaking at the AFR Retail Summit in June 2020, Afterpay co-founder and US CEO Nick Molnar said customers bought home, entertainment and fitness-related goods at the beginning of the pandemic, before moving on to furniture and home office supplies in April.
By early May, customers turned their attention to clothes and jewellery.
Afterpay is not the only buy-now-pater-later (BNPL) company to do well during the pandemic, either.
Rival company Sezzle saw a similar uptick in new customers and underlying sales throughout the same period.
The up-and-coming BNPL provider facilitated the sale of $272.3 million worth of goods over the last quarter of the financial year – a 349 per cent increase in underlying sales.
Sezzle CEO Charlie Youakim said the numbers reflected customers’ desire for “a smarter way to budget their personal finances, and the overall market shift to e-commerce”.
Growing interest in interest-free payments
Sally Tindall, research director for consumer comparison site RateCity, said the surge in BNPL products’ popularity was chiefly driven by their interest-free repayments.
“Platforms such as Afterpay have been an extremely attractive choice for younger Australians who are wary of credit cards,” she told The New Daily.
“With no complicated sign up process, no interest charged and no fees to pay if you meet your instalments, these platforms are likely to keep on growing.”
Meanwhile, Australians have used the coronavirus lockdowns to slash their credit card debts, with Reserve Bank data released on Tuesday showing the total amount owed dropped a record 6.45 per cent in May.
Ms Tindall said that although many BNPL platforms will charge late fees for missed payments, customers who fall behind using these services are just as likely to fall behind on other financial products.
And for customers who make their repayments on time, most BNPL services are effectively free to use.
Afterpay’s quarterly results come after data from credit bureau illion and economic consultants AlphaBeta found consumers are using BNPL services more often today than they did during the Christmas shopping frenzy.
A separate survey of 350 BNPL users by Credit Simple found that more than a third of respondents (36 per cent) were using BNPL for the first time during the pandemic, and almost two-thirds (64 per cent) said they would continue using BNPL services once the pandemic subsides.