Afterpay Digital Card Makes BNPL Easier IRL

About two weeks ago we wrote about Klarna, a company in the increasingly frothy buy now, pay later space, that has seen its valuation skyrocket to $31 billion. In the same piece, we also took a look at Wisetack, a company that is applying the BNPL model to home services. Klarna and its main competitors have focused almost exclusively on eCommerce transactions. BNPL allows consumers to buy a pair of shoes, for example, online or in-store, and pay over four equal payments. Or some variation on that model.

But what, we asked, about local brick-and-mortar retail? How does that little dress shop on Main St. get in on the fun?  Here is what we wrote two weeks ago.

The pandemic’s acceleration impact on eCommerce has been much discussed. And it has no doubt fueled BNPL’s recent popularity. However, even with massive acceleration, for BNPL to become a common feature for small retailers (and perhaps other local merchants), it needs to be incorporated in the physical point of sale. After all, it remains true that most local merchants do most of their selling in real life.

Moving Beyond the Barcode

There was a significant move announced this week to make BNPL easier to use in-store. Afterpay, one of Klarna’s top competitors, unveiled a new digital card designed to make it easier for merchants to offer in-store payments. Right now the card is available in Australia.

Afterpay has in fact been offering its solution in-store since 2016 in the ANZ markets. This sets it apart from rivals like Klarna and Affirm that remain largely focused on the online space. The company says in-store transactions account for 22% of its GMV in ANZ.

It’s not clear how much of its worldwide trade comes from in-store. Though its’ certainly much less than 22%. And the amount of in-store trade coming from small, independent merchants is likely negligible. Afterpay launched in-store in the U.S. only back in October 2020. The company was founded in 2011 in Australia. It later relocated to the U.S. and now operates in nine countries around the globe. In the UK, Afterpay trades under the name Clearpay.

What’s different with the new digital card is that it sits inside a digital wallet. Its previous in-store offer was based on using a barcode reader. For this reason, according to Afrterpay CEO Nick Molnar, the new system reduces adoption barriers for merchants.

“There is enormous opportunity to reach a new customer, who out of habit or preference, opts to shop in-store, to easily and seamlessly utilize Afterpay at the point of checkout,” Molnar said in a statement. “Merchants will also benefit as a result of the Afterpay Card as it will remove integration effort and costs for their business to support Afterpay in-store, which in turn provides more merchants for customers to shop at, in more verticals, with more merchants on offer.”

So is this the breakthrough that will move BNPL downmarket into more small and independent merchants? Maybe. We will certainly keep an eye on it.

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