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Afterpay – what you need to know

Published on Sep 24, 2018

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You may have noticed a new player on the retail scene. Afterpay was launched onto the Australian retail sector less than four years ago and has quickly become a billion dollar business.

For those not yet familiar with the concept, as a business you register with Afterpay to process customer purchases through them. You are then charged a small fee per transaction plus a percentage of the cost of the goods, usually higher than a credit card transaction. In return, when a customer uses Afterpay for a purchase the retailer is paid for the total purchase price less the previously mentioned charges.

As a retailer you may benefit in securing purchases from people inclined towards impulse buys and/or without immediate cash or credit which you may have previously missed.

As a customer, after you signup online you can shop at participating businesses, either in-store or on-line, with the first payment immediately applied to your registered credit or debit card. The remainder is automatically paid to Afterpay in three fortnightly instalments with no extra payments or charges, unless something goes wrong.

On the pro side, for a customer that is confident of being able to pay the three instalments you can take the product home with you and pay later, a bit like a reverse layby.

So what’s the down side?

If when the remaining payments are due there is no money in the account or on the credit card you’ll pay a late fee of $10 and your account will be suspended. You will accrue late payments up to a maximum of $68 on each overdue purchase and then the matter goes to a debt collection agency.

The Afterpay model works well for many, however ASIC is concerned about the relative ease of, in effect, gaining access to credit.  As Afterpay doesn’t charge interest it doesn’t currently fall under any normal credit legislation, something that ASIC is seeking to remedy. Draft legislation has recently been released by ASIC to bring Afterpay and a number of other unregulated sectors such as funeral insurance in line to limit credit distress to vulnerable people in the community.


If you are experiencing debt issues contact National Debt Helpline.

For more information about the ASIC draft legislation.

Learn how you business can sign on to accept Afterpay.

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