Individual Assignment 2: Analysis of Afterpay Touch Group Ltd Venture

This report provides a detailed analysis of Afterpay, a successful Australian fintech startup. It begins with an introduction to Afterpay's background, including its founding, merger with Touchcorp, and core business of providing installment payment services to customers. The report identifies Afterpay's three main customer segments: individual consumers (millennials), merchants (retailers), and small-medium enterprises. It then examines Afterpay's competitive advantages, such as its first-mover advantage and the 'try before you buy' approach. The report also discusses barriers to entry in the industry and evaluates Afterpay's business model using the Business Model Canvas. Finally, it highlights challenges faced by Afterpay, including customer retention, fraud risks, and regulatory issues, and provides recommendations for addressing these challenges, such as identity verification, credit score systems and security checks. The report concludes with a list of references used in the analysis.

Individual Assignment 2
‘Anatomy of a Startup Venture’
‘After pay Touch Group Ltd’
1. Introduction and Background Information:
Afterpay is a smart and simple, interest-free payment program service provider that has been rising
payment channels across Australia, New Zealand, and the United Kingdom. Afterpay is an Australian
Start-up company dealing with financial technology and provide financial support to the customer to
purchase goods or services. The company Afterpay Holding Limited was founded in 2014 in Sydney,
Australia by two Entrepreneurs name Anthony Eisen and Nicholas Molnar. The firm later to merged with
TouchCrop in June 2017 to form Afterpay Touch Group Ltd. The key activities of the firm are to offers
portion instalment payments services to customers in various online stores and some physical shops, most
of them being retailer stores. Afterpay conveys an incentive by filling in as a mediator among retailers
and clients. It benefits the two gatherings because the portion instalment technique empowers clients to
'attempt before you purchase' and untimely utilization, which gives adaptability to clients and lifts deals
for shoppers simultaneously. Afterpay mainly operate with three main business units namely retail-
service, health and government, and mobility and payments
Afterpay has helped a broad scope of retailers to grow the size of business and to enter the market
forcefully. Afterpay is developing at a quick rate, with over 700,000 clients broadly shopping at more
than 5000 retailers including notable Australian style stores like Myer, Cotton On, and Sportsgirl. Also,
some electronic items and adornments are canvassed in Afterpay portion administration. Somewhat,
Afterpay is not thoroughly accessible to all shopping exchanges. Afterpay also charges a $10 late
payment fee in case the customer failed to submit payment on time.
Additionally, Retails are also being charged 4% service fee of the retail price by Afterpay, as compared to
big and vast market it is a small amount. However, Afterpay created substantially stable profit over the
year.
2. Targeted Customer:
Specifically, Afterpay has the main three types of customers. The primary one is the individual customers
(millennium) that uses Afterpay. Clients are permitted to utilize Afterpay to pay their buy into four
instalments paid week by week or fortnightly. No additional charges apply when clients make instalments
as per their instalment plan. As indicated by the Afterpay report 2017, it right now has 1.5 million
individual clients and yet developing. About 0.9 million clients are millennials, over of total of 6
millennials, it is about 15%. These customers are high school and university students who has significant
jobs enough to pay salaries.
The significant amount of Afterpay's revenue comes from its second type of customer, which is merchant,
and this includes retails that operate online or in-store. The retailers pay Afterpay for using its platform to
boost the annual sales. Merchant fees contribute a significant sum of amount in Afterpay revenue. It is
recorded that more 82% of revenue has generated from merchant fees (MarketLine 2020).
The third customers are one of the main clients as it strengthens the foundation of Afterpay. The third
customers are small-medium enterprises, which are not only paid for Afterpay service but also invested in

Afterpay. For example: In 2017, two most big retailer giants decided to partner up with Afterpay, and the
study shows that 1 out of 8 of their online customers use Afterpay service to check out. Ever since then,
Afterpay has experienced significant expansion in its share price appreciating from $5.45 to nearly $15 in
a short span of period. It has helped become Afterpay to be recognized worldwide.
Competitive Advantages:
In the Initial days when Afterpay just started to gain its growth, it was one of its kind services that
allowed its consumers to buy now and pay later with no additional charges or interest.
However, some other factors have helped Afterpay to gain many competitive advantages over its
competitor with some of the successful marketing strategies among millenniums. The success of Afterpay
was within a short period, and the company's potential growth was booming. One of the many advantage
company has gained ease terms by which merchants can form a partnership. The easy partnership
agreement has helped many companies to rapidly develop their business and increase their customer base
in an operating market. Few successful collaborations are Rebel, City Chic, and Mimco (Carayannis,
Sindakis and Walter 2015). The Afterpay has first-mover advantages as when introducing the company
has built strong trust with merchants as such financial technology was unique to their targeted customers
compared to its other competitors Zip Co. Aside from allowing customers to better finance and budget for
their purchases, a less obvious benefit is that Afterpay is allowing their online consumers to pay for their
purchase after they have received their items and have had a chance to try it. Unlike eCommerce
shopping where purchase needs to make by just identifying pictures and size, which might make a
disappointing online shopping experience, which is quite frustrating if the item just does not match the
expectation. Afterpay understands this frustration and has sought to resolve the issue innovatively with a
'try before you buy' approach. An 'obvious gap inspired the idea behind Afterpay in the market for the
ability for an online customer to try the goods before they have to pay, coupled with being able to spread
their payments over a short period of time' (Bindi, 2015).
3. Barriers to Entry:
The industry is highly attractive is it recently started to pick up growth. The barriers to entry for
instalment payment service is low, which makes it vulnerable to all financial-based organization to invest
in such technology. The 21st century has brought advances in social networking, communication
technology, and digital marketing which eventually have removed the substantial barriers for
entrepreneurs. A new entrant can easily acquire similar bargaining power as Afterpay only when they can
create the distribution channel and forms a network with retailers. Within its competitive market, the only
differentiation is commission charges to merchants will remain the company's core competitive point.
However, it positively will affect the growth of the company and might change the revenue structure of
Afterpay. The Afterpay has one close substitute most notably PayPal, which covers more than 50% of
market share and has an intensive level of connection with offline business owners as its been operating
for many decades.
4. The Evaluation of Business Canvas Model
The critical connections between the nine blocks of the canvas model and the company's value
proportion, the client portion that the organization considers are profoundly identified with cost age and
income floods of the business canvas model. According to Bocks and George (2017), the channels that
are utilized by the organization for making an offer among the clients are additionally legitimately
identified with clients' fragments square and clients' relationship squares. Then again, to produce
legitimate income according to the income streams, the essential exercises that the organization attempts
will likewise meet the client prerequisites and increment client connections (Scarborough, 2016). The key
accomplices of the organization have a direct connection with the essential exercises that the organization
embraces and its cost structure. The connection of all the block describes that the relationship will

company to generate substantial revenue and operate smoothly in the industry.
5. Challenges and Recommendation:
There are a few significant challenges and dilemmas for Afterpay:
Almost 90% of Afterpay's transaction was coming from exiting the market, which requires the ability to
retain and while no expansion of the customer base.
Simple process setup of the false account using sim card or VISA card can be made for criminal activity
as there are no policies on ID verification check. Due to this, the stock price has affected drastically, and
it is a regulatory issue as minors can easily purchase alcohol.
As the company operates on internet-based, there are high risks related to fraud and breaches of security
are another major issue that causes a roadblock in the smooth operations of the organization. Hence, the
customer's credit card details can be easily traced by a hacker.
Proof of Repayment capability is not being taken from customers. In the latest financial years, Afterpay
roughly earned $12 million in late fee charges which are not covered in the
$17.4 million that went into lousy debt which is happening by impulse purchasing on instalment, bad debt
is, in fact, a drain on the organization's profit.
The low level of solvency of some people prompts an expansion in the typically required investment
because of the length of the capital returned.
Due to evolving the environment regulation, Afterpay must invest in improving its system databases, such
as the validation process and Credit check, which eventually increase the cost.
Possible solution is recommended to overcome these challenges and difficulties: Recommendation
Most users of Afterpay are teenagers and people in the 20s. Therefore, Afterpay needs to introduce new
methods to retain and boost its customer base with deals promotion.
Corporations with Banks or organizations that can confirm the authenticated identity reduces identity
misrepresentation. Validation ought to be required on the first run-through of enrolment, and 90% of
Afterpay's exchanges are from rehash clients, and different types of corporations.
The company need to update its policies and work proactively with the regulator on strategies to decrease
unnecessary purchase and product restriction limit.
A credit score system can be adopted, and the more credit points, the higher the cost of borrowing. Start
with the low integral, an increase or decrease in credit points will be dependent on by how often and how
much a user can borrow, and whether the repayment is on time.
To decrease identity fraud, Afterpay needs to increase its security check that requires a system to verify
the user's photo with its legal ID during registration.
References:
AfterpayTouch 2020, The culture of AfterpayTouch, viewed 7 May 2020,
<https://www.afterpaytouch.com/touch-culture>.
Bindi, T 2015, ‘FinTech Startup Afterpay allows online consumers to try before they buy their items. Will
PayPal catch on?’, Startup Daily, April 17, viewed 6 May 2020, <
https://www.startupdaily.net/2015/04/fintech-startup-afterpay-allows-online-consumers-try- buy-items-
will-paypal-catch/>.
Han, M 2019, ‘Afterpay is different from competitors, says Co-founder’, Financial Review, January 7,
viewed 6 May 2020, < https://www.afr.com/companies/financial-services/afterpay- is-different-from-
competitors-says-cofounder-20190107-h19sxe>.
Koehn, E 2016,’How payment platform Afterpay is ralling social shopoholics to grow its network among

SMEs’, SmartCompany, Ausgust 31, viewed 5 May 2020,
<https://www.smartcompany.com.au/industries/retail/payment-platform-afterpay-rallying- social-
shopaholics-grow-network-among-small-businesses/>.
Bock, A.J. & George, G 2017, The Business Model Book: Design, build and adapt business ideas that
drive business growth, Pearson, UK.