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How Does Afterpay Make Money? [The Afterpay Business Model]

    How Does Afterpay Make Money

    How does Afterpay make money? Like real money and a profitable business, here’s everything that you need to crack the business model.

    How Does Afterpay Make Money?

    Before knowing this, let’s begin with what Afterpay is.

    What is Afterpay?

    Afterpay is a FinTech firm based in Australia that is known for its “buy now, pay later” service. This firm, which was founded in 2015, is now active in Australia, Canada, United Kingdom, United States, and New Zealand.

    Afterpay has partnered with online shops, and more than 8.4 million people have used the service to complete transactions. Retailers that accept Afterpay include Mac Cosmetics, Bed Bath & Beyond, Forever 21, and Finish Line.

    Afterpay’s founders, Nick Molnar and Anthony Eisen have been interested in creative and financial businesses. Nick already has an online jewelry company,, an online jewelry retailer which is still operational.

    By the time they were considering establishing Afterpay, firms like Affirm and Splitit had already launched similar businesses (buy now pay later).

    Afterpay is a business that allows its customers to pay for things in four installments. It collaborates with over 55,000 online merchants that have chosen to accept its payment methods.

    Fixed and variable merchant fees, late payment penalties, and cost-per-click advertising are all ways that Afterpay generates money.

    In less than five years, Afterpay has created a significant presence in international markets. Its revolutionary interest-free payment mechanism, which allows clients to buy first and pay later, is attracting a growing customer base.

    How does Afterpay work?

    A customer can buy products online and pay for them in four installments. The first installment must be paid in full upfront, with the remaining balance due within six weeks.

    Afterpay is simple to use; customers may either download the Android or iOS app for their phone or just go to the website.

    As an online shopper, you must choose “Afterpay” as your payment method throughout the checkout process. You may now pay in four installments for the products.

    How Afterpay makes money?

    Below are the ways how Afterpay makes money.

    Late Payment Fees

    When you pay all of your installments on time, there will be no fees or interest. Otherwise, late fees apply to your account. Furthermore, being late on a payment prevents you from purchasing another item through Afterpay.

    Customers can locate the due date for installments on their bills. Afterpay collects the installment amount automatically from the customer’s credit or debit cards if the payment is not completed on time.

    The first late payment penalty is $10. However, if the payment is not made within seven days of the due date, an additional $7 will be charged.

    For orders under $40, the late payment fee is set at $10. Late payment fines for orders above $40, however, are either $68 or 25% of the original transaction amount.

    Merchant Fees

    Afterpay’s primary source of revenue is merchant fees. It charges the business a fixed fee of 30 cents for every transaction. These merchants also pay Afterpay a 4 percent to 6 percent variable charge dependent on the sale amount or volume.

    First, merchants don’t have to do anything to collect installment payments from clients since Afterpay does it for them.

    People are more likely to buy more products in installments or part payments now that they have the choice to buy now and pay later.

    By delivering dependable solutions, Afterpay has effectively built a devoted consumer base. As a result, Afterpay has a high conversion rate, which is why merchants favor it.


    In 2021, Afterpay launched new advertising options that allow businesses to run adverts directly within the mobile app. Customers may not only find new stores, but they can now also discover new brands.

    Merchants pick which items to advertise. The forms of the listings are modifiable. Afterpay makes money by charging every click. According to Afterpay’s own data study, merchants that participate experience a 20% increase in sales.

    Because the business is still in its early stages, it has not been stated how much money Afterpay makes from this advertising. With over a million Afterpay app downloads already, it’s safe to assume that cost-per-click advertising will bring in a decent amount of money for the firm.


    Participating retailers provide Afterpay as a payment option both online and in-store. Customers who use Afterpay to purchase things receive them immediately and pay the purchase price in four payments to Afterpay. Afterpay makes a one-time payment to the seller for the products purchased, minus our charge.

    For shops, Afterpay has become a valuable source of new clients. Millions of people use Afterpay to find out where they can purchase, and Afterpay gives its retail partners sales. Many retailers would otherwise be unable to reach such a big number of key millennial clients.

    Afterpay has continued to grow its footprint in the United States and abroad. While the coronavirus pandemic has harmed many companies, it has helped Afterpay to grow at a rapid speed as buyers rush to online stores rather than physical stores.

    So, this was about how does Afterpay make money.