Afterpay founder Nick Molnar says Millennials are an often-misunderstood generation. Roughly defined as those born between 1981 and 2000, the generation often portrayed as being price-sensitive, irresponsible and disloyal consumers now makes up the single largest age group in New Zealand’s labour force.
Molnar says his generation has money to spend, but the circumstances have to be right before they’ll open their wallets. He points out that most Millennials came of age at around the same time as the 2008 Global Financial Crisis, which hit when he was 18.
“The messaging at that time was like, ‘Don’t spend money that you don’t have.’”
While the events of the GFC drove home the dangers of debt for watching Millennials, Molnar believes the behaviour from the financial sector that ultimately led to the crisis also made trust an important factor in Millennials’ willingness to pay up. He says the traditional credit model promotes their mistrust by profiting off “misbehaviour”, referring to the way credit facilities are based around earning interest on consumers’ late payments.
Afterpay, on the other hand, relies on retailer payments for the bulk of its profits: “We profit off good behaviour.” Millennials around the world are also widely burdened by student debt, Molnar says. These factors have all translated into a generational distaste for traditional consumer debt.
“Millennials want to spend their own money,” he says. “Afterpay is the world’s first Millennial-driven buy-now pay-later system,” says Molnar. “We invented this model.”
Afterpay was launched in 2014 in Australia. It’s a system which partners with retailers to allow shoppers to purchase their goods in four interest-free installments instead of fronting up with their own or borrowed money. Molnar developed Afterpay based on his own background in retail. When he came up with the core of the concept, he was 24 years old, working on distributing jewellery on eBay from his family’s Sydney business, the St Michel Internationale branch of Showcase Jewellers.
He was successful at this, noting that at one point, he was selling the most jewellery on eBay in Australia out of his bedroom, but his activity soon drew attention from a neighbour, corporate investment manager Anthony Eisen. Eisen introduced Molnar to his network and helped bring Afterpay to fruition.
“It was really this coming together of retail experience and finance experience that created Afterpay,” Molnar says.
Afterpay now handles more than 10 percent of Australia’s online retail, with more than 2.3 million customers signed up. It’s powered by partnerships with more than 17,000 retailers. New Zealand was Afterpay’s first international expansion in 2017, partnering with Trade Me, but since going live in the US in May 2018 through launch partner Urban Outfitters, Molnar says, it signed up more than 1000 American retailers in its first four months.
“We’ve just had an amazing reception in each international market,” says Molnar. Afterpay has its roots in fashion and beauty retail, but is expanding its reach into other categories – it’s now possible to buy a flight with Afterpay, or pay for dental care. The latter is very satisfying to Molnar. He says Millennials as a group don’t engage with health services as often as they should due to cost constraints, but having another way to pay will help get them to the dentist more often.
“I think it’s amazing when you can positively influence a market like health.”
Afterpay’s Millennial consumer base is generally responsible with its spending, he says. The average Afterpay user is 32, and treats the service as a kind of budgeting tool. The Afterpay system is designed with responsible shopping in mind – skipping one payment is all it takes to be prevented from making any further purchases with Afterpay, meaning users can’t rack up significant obligations while already financially out of their depth.
It’s also a myth that Millennials are fickle shoppers who’ll switch brands at the drop of a hat in search of a better deal. Molnar says if a company wins their trust, Millennials will pay above the minimum and stick with it long-term. He says this generation is increasingly stepping into the global spotlight, driving economic and behavioural change as consumer demographics shift and tastes evolve.
“The reality is that they’re vocally loyal to brands they support.”