Alternative Metrics, page-2536

Hey guys, I've read APT's submission to the RBA for the review of retail payments regulation. Some key points below. Some of the points might require further context. so encourage you to read it but hopefully there is some useful points for everyone.

• Employs over 550 staff.

• Klarna's current model in Aus is that they don't have relationships with their merchants. Klarna may be remunerated for some of the purchases thru affiliate marketing networks which pay between 3-15% in commissions. They also use the Ghost Card technique here in Aus. In other markets, it's APTs understanding that Klarna charge consumers a fee for issuing Ghost Visa cards.

• In the 12 months to 2019, purchases completed using BNPL products and services increased in value by almost 50 per cent. However at a total value of $6.2 billion, these purchases still constituted less than 1 percent of the total value of total payments last year.

• Purchases using Afterpay are assessed using a proprietary fraud and real time repayment capability check, employed at the time of each and every order. This is a sophisticated algorithm-based technology which identifies likely risk spots both within customer groups and by product. As a result, up to 30 percent of order requests are not approved (this can be as high as up to 50 percent for first-time customers). The sophistication and accuracy of these checks has resulted in a default rate8of 1.1% in FY2019.

• Notwithstanding [credit card reforms] over 60% of credit card balances remain interest-bearing.

• As the RBA notes, the minority of consumers that avoid interest charges and earn rewards are being cross-subsidised by consumers for who credit cards are an expensive and unsuitable product. This inherently unfair outcome means that under the traditional credit card model, as it was intended to operate, financially vulnerable households are subsidising wealthier households. According to AlphaBeta’s analysis there is no evidence of such cross-subsidisation.

• An Afterpay transaction is not more expensive than a non-Afterpay transaction for a merchant, due to the reduction in other costs (such as marketing costs and fraud costs) associated with Afterpay transactions

• AlphaBeta’s further analysis of the wider impact of Afterpay confirms there is no adverse impact to non-Afterpay customers as a result of our innovative and unique business model.

• Perhaps the most significant benefit the Afterpay platform provides merchants is our powerful marketing ecosystem...In the financial year 2018/19, the Afterpay Store Directory drove over 48 million referrals of Afterpay customers to our retail partners. In October 2019 alone, the Store Directory produced over 10 million referrals globally.

• Data insights are made available by Afterpay through a number of tools for merchants, including:

1. On-demand reports prepared forenterprise merchants that provide knowledge of their own trading with Afterpay as well as industry benchmarks,
2. Customised reports that provide merchants with deep analysis into particular customers segments or regions, and
3. Insights into the behaviour of Afterpay’s customers (e.g. most popular shopping hours) to help merchants optimise their marketing and resource allocation.

• AlphaBeta’s analysis concludes that Afterpay provides significant net benefits to merchants annually as a result of lower variable costs, and that Afterpay sales are more profitable than non-Afterpay sales (understandably no public detail disclosed).

• With a growing number of players in the BNPL sector, merchants have clear choice over which BNPL service to accept.

• Although Uber Eats charges its restaurant partners a significant fee (around 30%), restaurants are not permitted to impose a surcharge on customers.