Dive Brief:

• Buy now-pay later provider Afterpay is bolstering its installment offerings with a monthly, interest-bearing payment option geared toward higher-ticket purchases, the Block-owned company said today.
• Afterpay’s monthly payment option allows consumers to spread payments for big-ticket purchases, those between $400 and $4,000 in this case, over a six or 12-month period, according to a Oct. 5 news release. The new service has no late fees and no compounding interest.
• The payment option is initially only available for existing customers who make online purchases, but it will be extended to in-store purchases in 2023, Afterpay said. The company has partnered with First Electronic Bank to offer the financing.

Dive Insight:

The move expands Afterpay’s capabilities in a crowded BNPL market. Increased competition in the space has hampered Afterpay’s growth, Block Chief Financial Officer Amrita Ahuja acknowledged during the company’s Q2 earnings conference call in August. 

So has the shift from online to in-person shopping, she said. The BNPL financing trend took off amid the pandemic’s e-commerce surge. Ahuja told analysts at that time that San Francisco-based Block aimed to diversify Afterpay’s base, partly by incorporating high-ticket verticals.

BNPL gained steam with shorter duration “pay in 4” options, dividing payments for a purchase over a defined period of weeks, typically interest free. But rivals such as Affirm and Klarna already offer financing options for larger-ticket items, likely pushing Afterpay to debut its own offering in that arena. 

In light of Afterpay’s announcement, RBC Capital Markets Analyst Daniel Perlin told investors in a note today that he anticipates further competition in the space. 

For its part, San Francisco-based Affirm has said it’s pursuing offline growth with its Debit+ card; Swedish Klarna, which has shed hundreds of workers this year as its valuation declined, also has a card that allows consumers to tap installment options anywhere. 

As economic headwinds have shifted, BNPL providers are evolving by tightening underwriting standards, pursuing cost savings with employee cuts or rolling out products that offer more solid revenue streams, said Patrick DellaValle, a director in consulting firm Guidehouse’s financial services practice. 

As concerns mount over loan stacking by consumers and the fees they’re carrying, BNPL companies are facing more regulatory scrutiny.

Afterpay said in its release today that “more than 98% of Afterpay transactions never incur a late fee and more than 90% of Afterpay transactions are paid with a debit card.”