Afterpay Touch Group Ltd (ASX: APT) has completely changed the retail landscape.
Not since of the introduction of MasterCard and Visa cards in Australia has the shopping and payment process changed as much.
Afterpay charges $0.30 transaction fee and a commission that the retailer pays, of between 4% to 6% of the sale price. Plus Afterpay receives any late fees if the customer doesn't make the repayments to Afterpay on time.
For now, retailers using Afterpay are seeing a rise in sales, perhaps because it brings forward sales rather than fundamentally increasing the overall cashflow in the system.
However, some commentators are pointing out that retailers may soon see Afterpay as an expensive cost and could increase prices to compensate. That would mean that non-Afterpay users would be paying higher prices to theoretically subsidise the users of Afterpay.
Gareth Brown from Forager Australian Shares Fund (ASX: FOR) has suggested that everyone who is willing to pay upfront should ask for a discount, such as 5%, where buy now, pay later options are available.
It does make sense why upfront-payers could be given a discount. Why should people pay more for goods if they have nothing to do with the higher costs of the business due to Afterpay?
Afterpay users could actually make themselves better off by using Afterpay considering there are no costs of using the service if you pay on time. Imagine if you were trying to maximise every dollar. You could pay through Afterpay, and with the temporary cashflow delay you could put that cash in the bank and earn interest until the next Afterpay instalment was due. But, that would be a lot of effort for not much reward. I think it's best to just pay upfront for items.
I applaud Mr Brown for suggesting that people paying upfront should be rewarded. I appreciate that Afterpay is a wonderful new system, but it may end up penalising people who don't use it if retailers increase their prices to compensate.
