Australia’s Afterpay System Brings Layaway-Style System to US

An unexpected development in the 2008 holiday shopping season was the revival of layaway. This old practice of putting goods aside and making regular payments on same until they were picked up later goes back to the Great Depression, and kept going until about the 1980s, when credit cards started up. The impact of the Great Recession brought back the practice to some applause. Now, layaway may be a matter of course at Urban Outfitters, who recently teamed up with Afterpay to make a kind of layaway permanent, and mobile.

Afterpay, considered one of Australia’s fastest-growing fintech operations, sent word our way about its new connection to Urban Outfitters and the full range of brands therein including Anthropologie and Free People. That connection joins a crowd of over 14,000 other such brands ranging from Sephora to Stylerunner and a bundle in between. Afterpay now processes one transaction in four related to fashion and beauty sales online.

Those using Afterpay can pay in four equal installments without interest payments. Afterpay itself assumes the non-payment risk itself, which must be sufficiently low to make this business model worthwhile.

Afterpay’s founder and CEO, Nick Molnar, noted “Afterpay helps shoppers get over that initial price hurdle by offering a platform to help budget for things that they want without needing to take out a loan or open a credit card. This is particularly relevant for millennials who are reluctant to use credit cards and other forms of traditional finance.”

Molnar also noted that retailers got plenty out of the arrangement as well, not only improving conversion rates but also incremental sales by as much as 30 percent.

The increased deleveraging that was commonly seen after the Great Recession kicked in a hefty new interest in layaway, and while that deleveraging didn’t exactly take, the notion of layaway is still in play. Afterpay makes it a lot easier to get in on the concept, and ultimately provides a way for people to get what they want without the pain of one big payout, either at the register or later when the credit card statement comes.

This is likely appealing, as was made clear by the statistics on improved sales and engagement rates. But will it catch on in the US? Only time, and Urban Outfitters, can tell.