Business Model: Canvas of Afterpay.

Running head: BUSINESS MODEL CANVAS OF AFTERPAY
BUSINESS MODEL CANVAS OF AFTERPAY
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1BUSINESS MODEL CANVAS OF AFTERPAY
Executive Summary
This business model report has dealt with the business model of Afterpay, a leading finance
providing company of Australia. Launched in the year 2014, the company went public just
within two years of its operation that is, in 2016. The growth of the company is breath-taking
and from this report, it is clear that it is because of their business model that is perhaps the
most surprising. This report has briefly portrayed the nine building blocks and the
relationships between them in terms of the company and its business operations. However, in
order to sustain its growth in the near future, Afterpay needs to do the following:
a) Strengthen its processes of business development
b) Strengthen its resources
c) Invest more in technology
d) Increase its product offerings for attracting wider market.

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Table of Contents
Executive Summary...................................................................................................................1
I. Introduction........................................................................................................................3
II. Business Model..................................................................................................................3
A. Building Blocks...........................................................................................................3
1. Customer Segments.................................................................................................3
2. Key Partners.............................................................................................................4
3. Value Proposition....................................................................................................4
4. Key Activities..........................................................................................................4
5. Channels...................................................................................................................4
6. Revenue Streams......................................................................................................5
7. Cost Structure..........................................................................................................6
8. Key Resources.........................................................................................................7
9. Customer Relationships...........................................................................................7
B. Interrelationships.........................................................................................................7
C. Critical Success Factors...............................................................................................7
D. Downside Risks...........................................................................................................8
E. Business Model Changes.............................................................................................8
III. Conclusion.......................................................................................................................8
IV. Recommendations...........................................................................................................9
V. Appendices:......................................................................................................................10
Appendix 1: Business Model Canvas of Afterpay...............................................................10
Appendix 2: Financial Performance of Afterpay.................................................................11
VI. References:....................................................................................................................12

3BUSINESS MODEL CANVAS OF AFTERPAY
I. Introduction
Afterpay is a successful Australian company. It is engaged in technology driven payments
and provides its customers finance during their purchase making that they are required to
repay within 22 days. It was founded in the year 2014 by Nicholas Molnar and Anthony
Eisen in Sydney (Ridley, 2019). It currently operated in many foreign countries apart from
Australia and they include United States and New Zealand and is still focused on expanding
its market to other different countries as well. The service of Afterpay is unique as the users
are not required to pay any interest or fees like it is in case of other traditional loans.
Customers can make purchase either online or from any other stores in the market and
Afterpay shall be paying their product price for that time. The business surrounds around
“Buy Now, Receive Now and Pay Later” concept. This paper shall elaborate on presenting a
brief analysis of its business model through the business model canvas described by
Osterwalder and Pigneur’s (2010). It would further elaborate on the key relationship between
the nine blocks, the critical success factors for the company, the downside risks and the
changes that it should make in its business model.
II. Business Model
The business model of Afterpay is very attractive due to its scalability and capital efficiency.
The company targets individuals over eighteen years age and they are required to pay their
due amount in easy instalments (Rowbotham & Jepson, 2018). With the same, the company
offers short term repayment period and low order values only and these two aspects help the
company in reducing down its risks.
A. Building Blocks
1. Customer Segments
The key customer segments of Afterpay are the businessmen, merchants, retailers and the
shoppers. However, its target market is the millennials over 18 years (Arjunwadkar, 2018).

4BUSINESS MODEL CANVAS OF AFTERPAY
Source: (Afterpay Touch, 2018)
2. Key Partners
The Key partners of the company are the third-party merchants. Also, the payment providers
including the Mastercard and Visa along with the different banks and financial institutions
are also its partners. With the same, the online and the physical stores where customers do
their purchase making through Afterpay are also in partnership with the company. Also it
received about 200 million dollars of funding from the National Australian Bank (Viergever
& Hendriks, 2015).
3. Value Proposition
The key value propositions of the company include multi-payment facility, secure payment
facility and multi-currency transaction facility for the online customers. Furthermore, the
company has a user friendly website which is very easy to access and handle by any shopper.
Also, the cost related to the establishment or set up of business is totally eliminated.
4. Key Activities
After pay provides security to all its customers and has created an effective R&D (Research
and Development Platform). Furthermore, the company provides 24/7 support to all the
customers who want to reach it in any point of time. Other activities include marketing,
promotion and advertising.
5. Channels

5BUSINESS MODEL CANVAS OF AFTERPAY
There are many channels of the company including its own website; online and digital
platforms and advertising; advertisements and campaigns done by its partner firms; and the
social media platform.
6. Revenue Streams
Afterpay’s revenue streams comprise of pay later and pay now scheme. Pay later is the key
source of the company’s revenue. It gain good amount of commissions from its partners in
terms of transactions made. Its merchant fee includes 61percent of the total revenue. Also,
when customer fail to repay within the due date, the company charges interest and an income
comes from that interest. It revenue increased to 22.9 million dollars from 1.4 million dollars
and it was due to a rapid growth in the retailers’ number (Stuart, 2017). More than six
thousands of retailers had integrated the Afterpay’s online platform in Australia by the ending
of fiscal year of 2018.
Source: (Afterpay Touch, 2018)

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Source: (Afterpay Touch, 2018)
7. Cost Structure
Cost structure includes the cost related to the customer acquisition, cost related to the given
security for transaction making and that related to the platform development. It also includes
the cost related to inclusion of transaction costs, the costs of debt to fund the receivable
balances and the unrecovered instalments payments.
Source: (Afterpay Touch, 2018)

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8. Key Resources
Key resources of the company include the online platform of the company that is provided to
the users to access the service of the company, the R&D team that looks after the R&D
process, partnership agreements made with the partner companies as well as development of
the existing market position achieved by Afterpay throughout its business operations (Anderl,
Schumann & Kunz, 2015).
9. Customer Relationships
It is to note that Afterpay provides its customers will free memberships and provide different
payment methods as per the needs of the customers (Muzellac, Ronteau & Lambkin, 2015). It
provides 24 hours support to its customers related to any service related queries.
B. Interrelationships
The key relationships across the nine building blocks are all related to the block of value
proposition. It is to mention that Afterpay allows its users with buy now, receive now and pay
later facility with absolutely zero interests and no added fees. It deducts the charges from the
order value directly. This has provided flexibility and convenience to the customers in terms
of payment solutions. It is the customer segment that is directly related to the generation of
cost and revenue streams of the business model. According to Baran and Galka (2015), the
channels of the company are also related to the customer segments and the customer
relationship. On the contrary, for generating proper revenue, the key activities that Afterpay
do also meet the requirements and needs of the customers and at the same time, increase the
customer relationships.
C. Critical Success Factors
Afterpay needs to work on certain success factors for achieving long-term business success
and they are listed below:
a) It should develop its stores at the places where it targets to set up its goodwill
b) It should concentrate more on promotion and advertising as there are high number of
competitors in the market including FuturePay, QuadPay and PayPal.
c) It should take strategic reviews of all its business lines frequently for ensuring proper
resource allocation
d) It should expand its business to other e-service markets

8BUSINESS MODEL CANVAS OF AFTERPAY
e) It should focus on its product and market development activities and practise
differentiation pricing to retain its loyal customers.
D. Downside Risks
It is to mention that Afterpay is still in its early stage of development and establishment.
Although it has a competitive edge of providing fee-less and interest-free loans, there is still a
threat from new market entrants in Australia (Tauscher & Laudien, 2018). This can disturb its
market share. In the modern world, the needs and expectations of customers keep on
changing and this further pose high challenge to Afterpay as it need to keep evaluating those
changes and develop itself to serve them better. Also, it might be required to make some
additional funding due to the fact that expected growth is a great challenge for it to raise
money. Also, there is a potential risk of facing defaults from its service users. With the same,
change in terms of laws and regulatory environment further possess negative impact on the
business operations.
E. Business Model Changes
Below are mentioned some changes that Afterpay can take into consideration while
developing its business model as this will help it in increasing its success factors that would
further help it in sustainable development:
a) Afterpay can reduce its fines that it charges to the customers on non-payment by
stipulated time. This would attract more number of customers and would help the
company in building a competitive edge.
b) It should open up some more physical offices so that it could effectively deal with the
customers who demand for verification of the company prior to trust it and making
any sort of transactions.
c) It should analyse its customer needs by conducting customer need analysis and
surveys frequently.
d) It should invest more in R&D processes
III. Conclusion
Hence, from the above analysis, it can be concluded that Afterpay is leading the Australian
finance industry. It has a good business model that is the key behind its rapid growth within
such short period. It is user friendly and its target market is the millinneals over 18 years age.

9BUSINESS MODEL CANVAS OF AFTERPAY
However, there are certain risk factors that if not handles properly, can negatively impact its
success factors. In order to cope up with those risk factors, below are made some final
recommendations that Afterpay can make use of.
IV. Recommendations
a) Afterpay should increase its number of physical stores.
b) It should invest more in technology and must expand its service offerings with new
services such as providing short loans for certain period of time.
c) It should decrease its payment period and increase charges to reduce credit default
risk.
d) It should decrease the minimum finance availing age to sixteen years as this can act as
a merit for the company.

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V. Appendices:
Appendix 1: Business Model Canvas of Afterpay
Key Partners
 Investors
 Retail merchants
 Banks
 Telecommunications
, health, and
convenience retail
sectors
Key Activities
 Developmen
t and
provision of
payment
solutions
 Sell tickets
and
vouchers
.
Value
Proposition
 Technology
leadership
 Innovation
and data
analytics
 Convenienc
e
 Low-price
Customer
Relationshi
ps
 Automate
d services
 Self-
service
Customer
Segments
 Millennials
Key
Resources
 Proprietary
software
platform
 Pay Later
business,
being
Afterpay,
and a
 Pay Now
business
 Mobility
and
Payments
 Retail
Services
 Human
resources
Channels
 Proprietar
y software
platform
 Mobile
devices
 Interactiv
e voice
recognitio
n
 Website
 Social
media
Cost Structure
 Transaction costs
 Debt costs
 Cost of sales
 Finance cost
 Operating costs
Revenue Streams
 Pay later and pay now
 Merchant fee

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Appendix 2: Financial Performance of Afterpay

12BUSINESS MODEL CANVAS OF AFTERPAY
VI. References:
Afterpay Touch. (2018c). Preliminary final report - Afterpay Touch.
https://www.afterpaytouch.com/images/APT_2017_4E_Annual-Report.pdf
Anderl, E., Schumann, J. H., & Kunz, W. (2016). Helping firms reduce complexity in
multichannel online data: A new taxonomy-based approach for customer
journeys. Journal of Retailing, 92(2), 185-203.
Arjunwadkar, P. Y. (2018). FinTech: The Technology Driving Disruption in the Financial
Services Industry. CRC Press.
Baran, R. J., & Galka, R. J. (2016). Customer Relationship Management: the foundation of
contemporary marketing strategy. Taylor & Francis.
Muzellec, L., Ronteau, S., & Lambkin, M. (2015). Two-sided Internet platforms: A business
model lifecycle perspective. Industrial Marketing Management, 45, 139-150.
Osterwalder, A., & Pigneur, Y. (2010). Business Model Generation. Hoboken, New Jersey:
John Wiley & Sons Inc.
Ridley, S. (2019). Five Australian startups. Company Director, 35(5), 26.
Rowbotham, J., & Jepson, G. (2018). The founder: You can bank on it. Company
Director, 34(11), 70.
Stuart, D. (2017). In sync: Payment pioneers. Company Director, 33(2), 18.
Täuscher, K., & Laudien, S. M. (2018). Understanding platform business models: A mixed
methods study of marketplaces. European Management Journal, 36(3), 319-329.
Viergever, R. F., & Hendriks, T. C. (2016). The 10 largest public and philanthropic funders
of health research in the world: what they fund and how they distribute their
funds. Health research policy and systems, 14(1), 12.