How Afterpay Makes Money? 2022 Update

“Buy Now Pay Later” is the fundamental service offered by Afterpay. A FinTech startup based in San Francisco, California. Let’s get into a bot detail on ‘How AfterPay Makes Money’ as per the recent update.

Afterpay has a direct partnership with the merchants as they are paid off on a scheduled basis. This fearless deal asks the customer for an upfront 25% down payment when they make a transaction. The remaining 75% is paid in 3 installments, interest-free, fortnightly payments. Merchant’s percent & clients’ late fees are how Afterpay makes money.

Origin Story

An Australian financial technology company, Afterpay has a presence in the United Kingdom, Canada, and New Zealand.

Nick Molnar & his former neighbor, Anthony Eisen, started the company in 2015, while they were still neighbors. At the age of 19, Molnar was an eBay seller, reselling jewelry leftovers from his parent’s jewelry store. As he worked late at night preparing items for delivery, he drew Eisen’s interest and the two became fast friends.

Sometime later they started talking about a firm that would take the risk out of a conventional retail transaction for both the sellers and buyers. As a result of this, the concept for Afterpay came to be. Afterpay pays the merchant and then asks the customer for a 25% down payment when they make a transaction. The remaining 25% is paid in 3, interest-free, weekly payments.

More than 11 million Afterpay customers already utilize the service worldwide.

Afterpay revenue generation

The way how Afterpay makes money extremely relies on two factors. According to Afterpay’s terms, customers may borrow up to 75% of the purchase price. However, it is not a typical lender or credit provider, and it does not make money from interest payments.

Instead, it generates revenue in a variety of ways.

Merchant fees

Afterpay charges the merchant a fee for every transaction it processes.

The majority of Afterpay’s earnings come from this charge, which is 30 cents plus a variable cost of 4-6 percent. Depending on the amount & volume of all transactions, the precise cost is calculated. There is a reduced fee for merchants that sell more or offer more expensive goods.

As a reminder, merchants are allowed to provide their goods and services without the use of Afterpay. Afterpay, on the other hand, asserts that offering a payment plan boosts average order value by as much as 20%. It also boosts the pace of customer acquisition.

Afterpay may also charge a merchants fee to offset the risk of a consumer defaulting on a payment.

Late fees

In the event that an Afterpay customer misses a scheduled payment, the company collects a late payment charge.

The first $10 late fee is charged. If the weekly payment is not made within seven days of the original due date, you will be charged an additional $7.

Orders under $40 are only subject to a $10 late charge the first time they are placed. There is a maximum late charge of $68 for orders above $40, limited to 25 percent of the original purchase value.


  • Financial technology business Afterpay has a foothold in most developed, western countries. Entrepreneurs Nick Molnar & Anthony Eisen envisioned a retail business that was completely risk-free for both buyers and sellers when they started the company.
  • Because Afterpay is not really a typical lender, it does not charge interest. However, retailers are charged a fee for using the service.
  • Afterpay additionally charges a late fee to customers depending on the initial purchase amount and the length of time between repayments.

Other FinTech Companies

Besides seeking for how Afterpay makes money. There are several companies providing similar BNPL and relevant valuable services.


Robotic investing and micro-investing are two of the fintech services offered by Acorns. Most of the company’s revenue comes from three types of subscription plans: Lite ($1/month), Personal ($3/month), and Family ($5/month), which include Invest as well as Later (retirement) as well as Spend (personal checking account). Lite ($1/month) gives users access to Acorns Invest, while Personal ($3/month) adds Later (retirement) as well as Spend (personal checking account) to the mix.


It began as a pay-later service linked into merchant checkouts, but Affirm now derives money from businesses’ fees when customers choose to use the service. When the originating bank repurchases consumer loans from Affirm, the company earns interest on that money. About 50 percent of Affirm’s earnings in 2020 will come from merchant fees, 37 percent from interest, and the remainder from virtual cards as well as other service fees.


Taobao’s payment arm, Alipay, was founded in 2004 by Chinese entrepreneur Jack Ma as a mobile & online payment platform for Taobao. Therefore, Alipay is Alibaba Group’s B2C division. A combination of escrow fees, value-added services, and fees for Alipay’s Credit Pay Instalment business is how Alipay generates money.


When Jon Stein and Eli Broverman established Betterment in 2008, they were both MBA graduates. Investment plans, financial counseling packages, betterment for business, betterment for advisors, cash reserve, & checking accounts are all ways in which Betterment generates revenue.


Apps like Venmo allow users to exchange and transfer money with friends for a wide range of services. Using a credit card will result in a 3.0% transaction charge. Venmo has also partnered with Mastercard to develop a debit card. Venmo was purchased by Braintree in 2012, and Braintree was purchased by PayPal in 2013.


With its mobile banking app, Chime is an American neobank (internet-only bank), which provides fee-free financial services while making most of its money from interchange fees (paid by retailers when users use their debit cards) & ATM fees.


Cryptocurrency trading and asset storage platform Coinbase is one of the most popular in the world, with the goal of “creating an open financial system for the globe.” As a search & discovery engine promoting crypto assets, the platform fulfills both functions. Fees for transaction processing, custodial services, interest, and subscriptions are the main sources of revenue for the organization.


An American registered real estate broker, Compass utilizes internet real estate technology like a marketing tool. When a deal is completed or a renter is secured for a rental property, the firm collects sales commissions (a service allowing the seller to purchase a home before the revenue from the sale of their previous home is available).


Fintech platform Dosh provides users with automatic cash backs. In order to create automated cash-back programs, it links major credit card issuers with online and physical companies. A commission is paid to the firm for each qualified sale made by a customer who is referred by an affiliate.


In 2020, Morgan Stanley will pay $13 billion for E-Trade, a trading platform that allows investors to trade preferred and common stocks, ETFs, options, bonds, mutual funds, as well as futures contracts. All of E-revenue Trade’s streams are derived from various fees and service charges, as well as interest income.


Klarna is often compared with how Afterpay makes money, and vice versa. Or Afterpay vs. Klarna.

However, there’s a slight difference specifically in terms of verification. With Klarna, consumers may use the temporary Visa card provided by Klarna to make purchases. A mild credit check is then carried out before it pays the vendor. Merchants are charged by Klarna to use the service. Additionally, Klarna receives a commission on interchange fees and income generated on clients’ accounts.


Claims are processed quickly and accurately by Lemonade, an insurance technology business that makes use of artificial intelligence and behavioral economics. The firm uses technology to speed up client onboarding while also implementing a finance model that minimizes conflicts of interest with consumers (perhaps by donating the variable premiums to charity). The firm produces money through selling its basic insurance products, and it also aims to increase sales via its technology platform.


NerdWallet is a personal finance website that provides tools and advice on a wide range of topics. As a basic credit card comparison website, the firm quickly garnered a following. Affiliate commissions are how NerdWallet generates revenue. These commissions are set by affiliate agreements.


It is possible to invest in stocks, exchange-traded funds (ETFs), options, and cryptocurrencies without paying any fees with the Robinhood app. It makes money by selling: Starting at $6 a month, Robinhood Gold is a margin-trading service that earns interest on customers’ cash and stocks & rebates from market makers as well as other trading venues.


In addition to offering student loans, SoFi also offers credit cards, investments, and life insurance via its online lending platform. Loan securitization and payment processing fees account for most of the company’s revenue streams.


Squarespace is a web hosting and website-building service based in the United States. As a blog hosting business started by a college student in 2004, it has grown to be one of the most successful web design firms. Subscription plans are the company’s primary source of revenue. In addition to the monthly fees, it also generates money by customizing the service. As well as transaction fees for the website on which the transactions are processed.


For young investors, Stash is a FinTech platform that provides a wide range of financial instruments, together with individualized investment advice and life insurance, to help them build wealth. Subscriptions, payment for order flows, cashback, & interest on funds in members’ accounts are the primary sources of revenue for the organization.

Final Words On How Afterpay Makes Money

The way how Afterpay makes money is transparent and understandable. Now the question is ‘How much does Afterpay charge retailers?‘ If you’re willing to become an Afterpay merchant, it’s quite essential to know how internal processing works. And whether it is in favor of merchants or not.

Or if you’re planning to Starting a Company Like AfterPay

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