How much does Afterpay charge merchants?

How much does Afterpay charge merchants?

We’ve recently had to integrate Afterpay in to some of our clients’ Shopify stores and found during the process the same question kept coming up. How much does Afterpay charge the online shop? So we decided to investigate…

What Is Afterpay?

Afterpay is a new way for customers to shop online, especially if they want to buy products that they can’t quite afford yet. Repayments are spread evenly across fortnightly instalments, so the customer doesn’t feel the full financial pressure of a purchase in one go. The customer doesn’t pay any interest or charges (unless the payment is made late, then late fees apply).

But how does Afterpay work, and how does it make money? Apart from late fees from the consumers, they make the bulk of their revenue from online shops for using their service.

So, What Does Afterpay Charge The Merchant?

The online shop is charged a flat fee of 30 cents and a commission that varies with the value and volume of transactions processed using Afterpay. The more you sell, at a higher value, the lower the percentage fee will be. The fee ranges from just over 6 percent per transaction down to 4 percent per transaction. While the charge is more than regular credit card fees, the benefits can possibly outweigh the additional cost.

They accept Mastercard and Visa credit and debit cards issued in Australia and work with Shopify, WooCommerce, Neto, BigCommerce and Magento at this stage.

How Long Does It Take Afterpay To Pay The Merchant?

Afterpay usually takes up to 48 hours to pay the merchant.

How Do Shopify Merchants Benefit From Afterpay?

The benefit for the Shopify store is they can use this service to offer repayment plans to customers, while still getting paid right away (Afterpay takes the risk).

Afterpay helps Shopify stores by…

  • Increasing sales due to higher online conversion rates – your customers are motivated to make purchases they may normally think twice about.
  • Higher order value – your new customers may spend more if they have more time to pay it off.
  • A larger customer base – your new customers may already be comfortable buying with Afterpay.
  • Reduced cart abandonment – more customers may purchase there and then.
  • Potential repeat purchases – the chances of getting returning customers to purchase from your business increases, as they are then familiar and comfortable with your store/checkout
  • Reduced fraud/credit risk – Afterpay settles purchase payments upfront so it reduces the risk of credit card fraud, something that is welcome for many small Shopify businesses.

Costs are reduced due to lower customer service costs, lower marketing costs and lower return rates.

Can Merchants Pass On Afterpay Fees?

While the rates may be higher than more traditional payment options, can a merchant simply pass on some or all of the costs to the customer? Well, not yet, although the Reserve Bank of Australia is pushing for regulatory approaches to remove their no-surcharge rules.

Currently, Afterpay prevents merchants from passing on the cost of the merchant fees to the customer or imposing a surcharge when shoppers use their buy now, pay later services.

Is Afterpay Worth It?

Afterpay is becoming more popular among customers, especially in the online fashion sector. As more eCommerce shops offer this service, the more customers are seeing this as a preferred payment option. If it is new to a customer, then they are encouraged to register with Afterpay from within the online shop.

Once in the Afterpay eco-system the customer is then more aware of shops that offer this service and are more likely to make a purchase, and even spend more than they would’ve otherwise. It also reduces the fraud risk sometimes associated with credit cards being used in online shops.

Consider the price point of your product offering and customers’ purchase behaviour online. Would the customers have bought anyway, even if it wasn’t offered? Did you just give away that percentage for nothing?

The only real way to know how it will effect your individual store is to give it a try, and see if it lifts conversions, and raises the value of each transaction.

How To Integrate Afterpay With A Shopify Store?

To integrate Afterpay on your Shopify store, complete these simple steps and display Afterpay as a payment method.

  1. Head over to your Shopify store’s Admin area.
  2. Drill down to Settings and then Payment Providers.
  3. In the ‘Alternative Payments’ section, click on the ‘Select additional payment method’ drop down field.
  4. Choose ‘Afterpay’ from the drop down options.
  5. Enter your Merchant ID provided by Afterpay into the Merchant ID field.
  6. Enter the Secret Key provided by Afterpay into the Secret Key field.
  7. Make sure to not tick the ‘Enable test mode’ box. The integration won’t work if this box is ticked.
  8. Click the ‘Activate Afterpay’ button.

How To Add Afterpay To A Shopify Product Page?

You’ll want to integrate the Afterpay logo into your Shopify product page to let potential customers know this payment service is available. If you’re not familiar with Shopify’s liquid code, this part can be a little difficult, and as experienced PHP developers, we’re available to help if you’d rather just get it taken care of by a professional web designer.

If you’re keen to give it a go, on your Shopify theme, you will need to edit the liquid code and enter the script according to the documentation issued by Afterpay. Head to your online Store, then > Themes > Edit Code. Next, go to the product pricing and add to cart button in your product template and insert the Afterpay/Shopify script. Save and refresh the file.

The Afterpay snippet (and logo) should now appear under the product price. As a last test run, head to the checkout process and see if the Shopify checkout provides the Afterpay option.

We have integrated Afterpay with many online shops built on Shopify. So whether you just want to know more about how much does Afterpay charge merchants and other online shops, or you need help with your Afterpay/Shopify integration, please feel free to get in touch.