It’s no secret that people hate to wait, they want the ease and convenience of buying something and getting it straight away. But, with the economy as it is and the cost of living so high, people are often forced to put things on layby and pay the item off before collecting it. This is where Afterpay comes in. Afterpay allows consumers to pay a purchase off in instalments but receive the item straight away! But what impact does Afterpay actually have on the consumer and on the Australian economy? Keep reading to find out.
What is Afterpay and how does it work?
As mentioned above, Afterpay is essentially a version of layby that allows the consumer to take the item home (or have it shipped to them) before they have paid off the total amount. This is now known as ‘take home layby’. It’s really simple to sign up, all you have to do is create an account on the website and enter your card details, then you can start shopping online or in stores straight away! The model breaks down the total cost of an item into four fortnightly payments with no interest or added cost, unless you miss a payment.
How does Afterpay effect the consumer?
Using Afterpay can be really handy, it’s much easier to pay off $25 a fortnight for four fortnights than it is to pay $100 in one go. As of 2016 there were 140,000 users in Australia and that number continues to grow as more people become aware of the service, so people clearly see value in it. However, it encourages customers to use their credit card to pay for items and pay the instalments, meaning this could encourage people to fall into debt.
How does Afterpay effect the economy?
As Afterpay becomes more popular, more and more businesses are getting involved. Retailers pay the platform a percentage of each sale and this is how they make their money. But how does this business model impact the economy? Well, when people spend money, the economy grows. Statistics show that users are 34% more likely to spend money, and they will spend up to 25% more than the average customer. On top of this, Afterpay’s website shows all of their retailers, this makes consumers more aware of smaller Australian owned businesses. The more we spend, and the more we spend with Australian owned businesses, the more our economy grows.
So, let’s sum it up. Afterpay is really great for the Australian economy but maybe not so great for the consumer. If you use a debit card, it is relatively safe, but it can be dangerous if you choose to use a credit card for purchases and spend more than you can afford to pay back. Nevertheless, if someone wants something bad enough and buys it on a credit card, they could get into debt anyway, so its not really fair to blame this specific business model. As for the economy, Afterpay appears to be helping it. And a strong economy can never be a bad thing!