AfterPay vs ZipPay: What You Need to Know About BNPL for Business

Unless you’ve been living under a rock this past year or so, chances are, you’ve heard of Buy Now, Pay Later. You may have even used a BNPL service yourself – just like the 2 million Australians who are going crazy for this payment scheme.

If you’re thinking of offering BNPL as a payment option for your e-commerce business, here’s what you need to know about this model as well as a few tips for choosing the right provider.
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The rise of Buy Now, Pay Later services

The BNPL model allows consumers to pay for their purchase in installments, allowing them to delay settling in full until much later. In most cases, the consumer is required to make a deposit when they make a purchase then settle the remaining balance in scheduled (usually fortnightly) intervals until the full price is paid off.

BNPL services can be used through smartphone apps, usually at the point of sale (POS), if the merchant offers it as a payment option.

Much like credit cards, BNPL helps reduce friction during the buyer’s journey as it allows consumers to receive their purchase right away while delaying payment. It also addresses common purchase-related concerns such as:

• Credit card information
• Data privacy
• Shipping charges
• Interest rates

In 2019, the total number of BNPL users in the continent was estimated to be around 2 million following a spike in sign-ups during Black Friday and Cyber Monday sale season. Roy Morgan estimates that BNPL users make up 9.4% of the Australian population, higher than 6.8% in 2019.
And according to Worldpay, over 4 million – 1 in 5 Australians – are expected to use BNPL services by 2023.

But more importantly, awareness levels are rising among Aussie consumers as 52.2% say they know about BNPL services.

Consumers’ growing familiarity and trust in the model, along with the increasing number of BNPL products entering the market, is expected to drive BNPL uptake.

Why should you use BNPL for business?

Consumers used BNPL apps in 8% of all e-commerce transactions in Oz in 2019 – a 166% increase from 2018 when BNPL services made up just 3% of total e-commerce transactions.

65% of Australians say the option to make smaller and easily digestible payments influence them to make purchases they normally wouldn’t make.

Over 30% of adults – about 5.8 million users – have one or more BNPL accounts.

Women are more likely to use BNPL services – 11.6% (roughly 1 in 10 women) say they used a BNPL app in the last 12 months compared to just 5.5% of men.

The demand for BNPL in Australia is largely driven by millennials – research by Roy Morgan found that Aussies between the ages of 14-34 make for 55.9%, or more than half, of BNPL users. Consumers in the 25-34 age range make up 33.5%.

Phil Pomford, General Manager at APAC, Worldpay Merchant Solutions, cites the following reasons for millennials’ affinity for the BNPL model:

• An aversion to debt following the Global Financial Crisis (GFC)
• A shift from traditional credit card payments to alternative payment methods
• Most BNPL providers in Oz don’t charge interest (though they typically charge late fees)
• Delayed payment options/staggered installments make it a sweet spot between a debit and credit card

But which BNPL provider should you use for business?

The best-known player in the BNPL market is AfterPay – 49.5%, or almost half of consumers, say that they’re aware of the service while 8.4% have reported using it within a 12-month period.

Market Zip, which includes both ZipPay and ZipMoney, follows closely behind.

What’s the difference between AfterPay and ZipPay?

These two BNPL providers work similarly by extending a line of credit to consumers and allowing them to receive their purchase immediately after the transaction has been completed. Both take regular debits directly out of the consumer’s account. Lastly, both have a transaction cap of $1,000 and don’t charge interest.

But there are key differences:

• AfterPay requires buyers to have a valid credit or debit card upon sign up while ZipPay doesn’t require users to own a card or a bank account.
• Afterpay collects a quarter of the purchase price payments each fortnight. Consumers and merchants can’t modify this payment schedule. ZipPay, on the other hand, lets you decide whether to debit payments on a weekly, fortnightly or monthly basis.
• If there isn’t sufficient money in the buyer’s account, AfterPay will give them 24 hours to make payment before charging a $10 fee and an additional $7 if the payment remains unsettled after 7 days.
• ZipPay is more lenient and flexible, allowing buyers to set up their own payment schedules. They only require that purchases made within a certain calendar month be paid in full by the last day of the next calendar month. If the buyer carries any balance past this initial period, ZipPay will charge a $5 maintenance fee.

How much will it cost you?

AfterPay charges merchants ¢30 plus commission per transaction while ZipPay charges ¢15 and commission.

The former takes a bigger cut of the purchase price and will take up to 48 hours to send payment while the latter takes a smaller commission and remits payment on a daily basis.

What do your customers want?

When choosing a BNPL provider, it’s only prudent to crunch the numbers and determine how much you can afford to pay them per transaction and how much you’re willing to give away in commissions while taking your profit margins, cash flow, and other financial factors into consideration.

But it’s also important to find out exactly what your customers want in a BNPL provider – are they comfortable with strict and pre-arranged installment plans or would they like more autonomy and flexibility? Do they have existing credit and debit cards or would they prefer fewer barriers to sign up?

Giving them the freedom to choose their own payment method can help ensure usage, build brand loyalty, and most importantly, increase online sales.

Work with Contevo today

Contevo is passionate about helping businesses offer more payment options to Australian consumers. We believe in “Continuous Evolution”. All businesses regardless of size must adapt to a quickly changing e-commerce market if they are to remain profitable and maintain their edge over the competition.

If you’re interested in using a BNPL service for your business, schedule a consultation today. We can’t wait to hear from you.