Nick Molnar’s “buy now, pay later” model of payments became popular during the pandemic, making him a billionaire this year.
Nick Molnar (30 years old) is considered to be the person who created new spending habits for millions of young people. The pandemic is helping your payment company to make money. His company’s stock soaring has helped his fortune surpass $ 1 billion this year, making him the youngest self-made billionaire in Australia, according to Australia Financial Review.
“You really can’t analyze what’s going on because a lot of things happen so quickly,” Molnar said on CNBC. He is the co-founder and co-CEO of Afterpay – a payment platform under the “buy now, pay later” model, allowing users to installment without interest.
This year, the six-year-old company became one of Australia’s hottest stocks, up 1,300% and has more than doubled its active users to 11.2 million as the pandemic changes spending habits.
However, the original purpose of Molnar and neighbor – Anthony Eisen when he founded his company six years ago was to deal with another crisis. “I recognized this trend while growing up during the 2008 financial crisis,” Molnar said.
At the time, he was a trade student at the University of Sydney. Molnar sees young people’s spending trends changing. He argues that they increasingly suspect traditional financial products, like credit cards, as it could send them into a spiral of debt.
“Growing up in that period was really memorable,” he said, “You see your parents, or their friends, unemployed. And so you think: ‘I’m going to spend my money. I like a debit card that’s the equivalent of a credit card. ”
So Molnar and Eisen decided to create a new, friendly solution for young people. Accordingly, they will charge a fee to the retailer when selling goods, instead of charging interest to the buyer. Under the “buy now, pay later” model, buyers can divide the cost (up to AU $ 1,500) into four installments. Meanwhile, the seller will pay a 4-6% commission per order. If a buyer misses a payment period, they will be banned from using the service until the full amount of the item is paid.
“In traditional finance, most of the revenue comes from the consumer, not the retailer. And then we think why not reverse the process,” he said.
After launching in 2014, the company grew very quickly. Cash-stuck consumers love this installment model. And retailers, which are eager to increase revenue, are also pleased with paying a small fee for the platform.
In just two years, Afterpay raised nearly $ 18 million (AUD 25 million) through its IPO on the Australian stock exchange. However, it wasn’t until 2018, when they expanded to the US, that their business took to new heights thanks to a tweet mentioning Afterpay by reality TV star Kim Kardashian.
Her sister’s cosmetic brand, Kylie Skin, is currently one of thousands of retailers on the platform. Sports fashion brands such as Lululemon or Adidas are also present when consumers’ habits change.
Subsequently, the pandemic accelerated this process further. During the blockade period earlier this year, transactions made with Visa credit cards fell more than 30% from last year. Debit card transactions meanwhile plunged, but recovered rapidly in May, when consumers started spending again on retail and home improvements.
“This trend is similar to what we saw in 2008. There has been a clear shift from credit to debit,” Molnar said.
After falling to AUD 8 in March, Molnar shares rose 1,300% to 105 AUD last month. Tech giant Tencent (China) also paid more than $ 200 million to buy a 5% stake in the company in May.
Afterpay is currently one of Australia’s hottest stocks. The two co-founders – with a 7% stake each – have become billionaires. “Both of us have previously agreed not to track stock prices. Prices will go up and down. I don’t think this means that our business is getting better or worse,” Molnar said.
Even so, many criticize that the company’s model encourages overspending. “It makes people think they can spend more than they really have,” said Hianyang Chan, a senior adviser at market research firm Euromonitor.
Currently, platforms under this model, such as Afterpay, Affirm and Klarna, are not regulated under consumer credit laws in most countries. Officials also fear that small retailers are uncomfortable with service fees like big firms, causing competition to decline.
Molnar says Afterpay is in discussion with authorities about these concerns. In 2020, they say 90% of transactions are paid on time. In general, deferred payment accounts for less than 14% of the company’s revenue. The rest is the service fees of retailers.
Even so, Afterpay is still not profitable. In 2020, the company’s revenue will more than double to 382 million USD. Losses halved to $ 16.8 million.
Molnar said he is currently focused on driving growth by expanding internationally. The key targets are the US, UK and Europe. “Different regions are in different stages of growth. In Australia, a third of young people use our services every month. In the US, we process more than $ 4 billion in transactions in 12 months.” But this is only a second year and things are just getting started, “Molnar said.
Ha Thu (According to CNBC)