In recent years, Afterpay has become a popular payment option for consumers. Afterpay has attracted millions of customers due to its flexible payment plans and no-interest policy.
But, what about merchants who want to accept Afterpay payments? We'll go over the fees and charges associated with Afterpay's merchant services in this article.
What Is Afterpay?
Afterpay is a platform that allows customers to pay for their purchases in four interest-free installments. Afterpay can be integrated into merchants' online stores, giving customers the option to pay with Afterpay at the checkout.
Fees for Afterpay Merchant Services
Afterpay, like any other payment provider, charges fees for its services. In most cases, these fees are calculated as a percentage of the transaction value plus a fixed fee. Let's take a closer look at the Afterpay merchant services fees and charges.
Rate of Merchant Discount
The merchant discount rate (MDR) is the fee charged by Afterpay to merchants for each transaction completed on its platform. The MDR is calculated as a percentage of the transaction value and varies with the merchant's industry and sales volume. The MDR can range from 3% to 7%, according to Afterpay.
Fees That Are fixed
Afterpay charges a fixed fee for each transaction in addition to the MDR. This fee is typically a few cents per transaction and is intended to cover the cost of transaction processing.
Late Charges
Customers can pay for their purchases in four interest-free installments using Afterpay. If a customer fails to make a payment on time, they may be charged a late fee. Late fees charged by Afterpay are intended to cover the costs of recovering outstanding payments from customers. Late fees vary by country and can range between $10 and $15 for each missed payment.
Chargebacks
When a customer disputes a transaction with their bank or credit card company, a chargeback occurs. Chargebacks can be expensive for merchants because they must refund the transaction value plus a chargeback fee. Afterpay charges a $15 chargeback fee per chargeback, and merchants may be required to provide evidence to back up their claim.
Fees for Currency Conversion
Customers can use Afterpay to pay for purchases in their home currency, regardless of the merchant's country of origin. If a customer chooses to pay in a currency other than the merchant's, a currency conversion fee may apply. This fee is usually a percentage of the transaction value and varies depending on the currency.
Afterpay Merchant Services Advantages
Despite the fees and charges associated with Afterpay's merchant services, using the platform as a payment provider has several advantages.
Sales Growth
Merchants can attract customers who would not have been able to afford their products otherwise by offering Afterpay as a payment option. Customers can make larger purchases and pay them off over time with Afterpay's interest-free payment plans.
Risk Reduction
Afterpay assumes the risk of nonpayment, so merchants don't have to worry about chasing down unpaid bills. Afterpay also offers fraud protection, lowering the likelihood of chargebacks and other forms of payment fraud.
Checkout Process
Integrating Afterpay into an online store can help to speed up the checkout process, lowering cart abandonment and increasing conversions. Customers can complete their purchases quickly and securely thanks to Afterpay's simple and easy-to-use checkout process.
Is Afterpay Good for Small Businesses?
Small business owners might have some concerns before setting themselves up with Afterpay. Those concerns are valid given that while Afterpay boasts that it can generate more sales, it will also charge a merchant fee on all the sales they make through the platform.
So, if the pros and cons of Afterpay are not looking that straightforward, the easier way to see if it’s worth it is by looking at your business’ gross profit margins, and then trying to understand just how (or if) Afterpay will either over or underperform.
If it is already helping you lock more sales without chipping away at your margins too much, then the merchant cost will certainly not outweigh the additional new sales that your business is getting via Afterpay.
For those who already use or just got Afterpay up and running, a similar process can also be done by calculating the percentage of new sales via Afterpay and the new overall ratio of sales paid by resorting to Afterpay as well.
It is important to remember that Afterpay is able to increase your customer’s basket sizes and convert an entire customer base who would’ve abandoned their carts otherwise.
So, generally speaking, is it usually very advantageous for small businesses to adopt Afterpay, however, doing the math first is advised.
Conclusion
The merchant services fees and charges charged by Afterpay may appear intimidating at first glance, but they are in line with industry standards. Merchants who accept Afterpay as a payment method can benefit from increased sales, risk reduction, and a more efficient checkout process.
Merchants can make an informed decision about whether or not to use Afterpay's merchant services by understanding the fees and charges associated with the platform.
