Which trends are driving the growing popularity of Pay Later solutions? Do you see any differences per age groups?
Key drivers for Pay After Delivery’s growth are consumers’ need to feel secure when shopping online, along with consumers’ need for simple and convenient payments. The importance of security is also underlined in our consumer research, where we see that it is online shoppers’ most important need. In fact, it is so important among online shoppers that we call it a ‘hygiene need’. Drilling down into the concept of ‘security’ reveals that the concept is two-fold: it is about offering trustworthy payment methods as well as reliable delivery.
Characteristics of Pay After Delivery also tap into the overall needs that online shoppers have: (1) the ability to try products before payment, (2) being able to return products before payment and (3) being able to postpone and split payment. Currently, around half of online shoppers express at least one of these three needs. These needs are significantly larger among younger and progressive online shoppers, which means that these needs will likely increase over the coming years.
What has been the impact of COVID-19 on Pay Later solutions and ecommerce as a whole?
COVID-19 has positively impacted the drivers for online shopping. Convenience is now the most important reason to make purchases online; and as consumers experience more uncertainty in their daily environment, aspects of trust and security are getting even more important. So, being able to use Pay After Delivery services – get the products, try them and pay for them later – gives consumers even more confidence. And of course, this also has a positive effect on our business.
In our research regarding the effects of the pandemic on ecommerce, we see that the number of online purchases is up +41% in the Netherlands, +22% in Norway, and +13% in Germany, by the second half of July. One can find these insights in analyses and forecasts on our blog, AfterPay Insights. As of August 2020, we have surveyed more than 31,000 consumers, and we continue to do so bi-weekly.
In which countries have you recently seen most growth? And do certain verticals stand out?
In our Insights work, we obviously see that the travelling and ticketing sectors are heavily impacted. On the other hand, online fashion is the vertical that has grown the most since the start of the pandemic.
This growth has mainly come from consumers shifting from offline to online. No other category has shown a similar inflow of new consumers: in the second half of March, 18% of online shoppers in The Netherlands and Germany had made at least one online fashion purchase in the past two weeks, growing to 29% in the Netherlands and 25% in Germany by the second half of July. These findings are comparable to what we experience on a transactional level.
We also see that ‘Heavy Shoppers’ drive a large share of ecommerce growth: heavy shoppers make up 10% of all online shoppers, but they stand for about 40% of all online purchases. Another interesting fact is that along with food and groceries, online purchases for pet food have increased massively as well.
Due to the pandemic, we see more providers offering Pay Later solutions. How does AfterPay differentiate from other solutions out there?
The trend of globalization in ecommerce is ongoing. More merchants aspire to serve the same consumers and this has for years driven up the consumer acquisition cost and the necessity for brands to shift from an acquisition focus to more of a loyalty approach. At AfterPay, we are committed to helping merchants facilitate their brand experience and consumer relationships by building a complete journey, including payments, that supports their brand values and positioning. How we do that? We put the merchant’s brand in the driver’s seat, and we have the expertise and capability to adopt processes for demanding merchants. This also impacts the way we build a professional support organisation around the merchants and how we drive innovation. In line with the more international ecommerce landscape, reach is relevant. Due to the regulatory differences for pay after delivery among European countries, we currently do not see many providers that can operate in multiple regions. AfterPay is active in nine markets, and we have a clear ambition to expand. We are a business unit within Arvato Financial Solutions that operates in 20 markets, and thus, has a strong track record in operating internationally.
What is on your roadmap for the next two years?
Since 2010 we have been committed to helping consumers separate the moment of purchase from the moment of payment. We enable consumers to pay at the pace of life. This commitment stands and fuels the innovation pipeline of our 300+ team members who operate from 13 different sites in Europe. The trend in which payments and lending blend into banking continues, as well as the one regarding consumers and merchants wanting to reach payment parity, regardless of touchpoint and channel. The way we define pay after delivery and how that experience plays out will continue to evolve fast.
This interview was published in our Payment Methods Report 2020, an extensive overview of what’s new in how people pay in the most relevant ecommerce markets.
About Johan Rönnerman
Since 2018 Johan spearheads AfterPay’s journey from a local Dutch payment hero to an international challenger. He holds over 20 years of international experience working in the intersection between commercial, tech, and innovation. Starting his career within Virtual Reality and robotics while spending the last two decades within digital and ecommerce for retail, insurance, and banking.
About AfterPay
AfterPay, a business unit within Arvato Financial Solutions, enables merchants to offer their consumers a convenient and safe way of paying – AfterPay enables consumers to pay at the pace of life. Their Pay After Delivery product, available in Central and Northern Europe, comes with five different payment options: the 14-Day Invoice, Campaign Invoice, Consolidated Invoice, Fixed Instalments, and AfterPay FLEX.
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