Afterpay co-founder Nick Molnar says Generation Z and Millennial shoppers are close to accounting for half of all retail spending by this end of this decade, predicting their aversion to credit cards will push debit spending more widely across the economy.
Molnar, an executive at Afterpay’s owner, Block, added the cost-of-living crisis had spurred greater demand for buy now, pay later (BNPL) products from younger consumers, likening the growth to the surge the company experienced during the COVID-19 pandemic.
Afterpay co-founder Nick Molnar.Credit: Dominic Lorrimer
Afterpay, founded in 2014, is the country’s biggest BNPL operator. It provides digitally approved interest-free loans, which borrowers repay over four instalments. The company, which has 3.5 million Australian users and counts Millennials and Gen Z as its main customers, is a key competitor to the banks’ credit card businesses.
As the government prepares to regulate the fast-growing BNPL sector, Molnar on Tuesday was bullish about its long-term prospects as a competitor to traditional bank lending, pointing to younger generations’ preference for debit cards over credit cards.
“At the highest level, in 2020 Millennial and Gen Z consumers represented 30 per cent of all retail spend in the Australian economy. By 2030, that consumer will represent 50 per cent of all retail spend,” he said.
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“That consumer still deeply prefers a debit card over a credit card. Over 90 per cent of our consumers use a debit card, not a credit card. And so you are seeing this debit card economy continue to get more pervasive and more prevalent, and our Afterpay consumers are looking to Afterpay to manage as much of their spend as possible,” Molnar said.
Afterpay says 44 per cent of its customers are Millennials (born between 1981 and 1996) and 28 per cent are from Gen Z (born between 1996 and 2010). Since launch, it has expanded from its roots in the fashion industry to other sectors including travel, food, toys, electronics and healthcare, and this year it raised its maximum credit limit to $4000 for customers who meet certain criteria.
The federal government has said it will move to regulate BNPL products including Afterpay this year, and Molnar said the regime should recognise that Afterpay was critically different to credit cards, which are built on charging customers interest.