Afterpay/Clearpay: An in-depth guide


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  1. Introduction
  2. How does Afterpay/Clearpay work?
  3. Where is Afterpay/Clearpay used?
    1. North America
    2. Europe
    3. Asia
    4. Australia and New Zealand
  4. Who uses Afterpay/Clearpay?
  5. Benefits of accepting Afterpay/Clearpay
  6. Afterpay/Clearpay security measures
  7. Working with Afterpay/Clearpay
  8. Alternatives to Afterpay/Clearpay

Afterpay, also known as Clearpay in the UK, is an Australian financial tech company that has emerged as a major player in the expanding buy now, pay later (BNPL) sector. Afterpay/Clearpay serves a growing customer base across multiple regions, and it partners with a large network of prominent brands and local businesses across industries. Its significant market share in key regions, such as Australia and the UK, makes it a leading BNPL provider.

Afterpay's flagship service allows customers to split payment for a purchase into four equal, interest-free instalments, with an instalment typically due every two weeks. This model provides customers with a flexible way to manage their spending without incurring extra costs. And unlike some competitors, Afterpay/Clearpay focuses exclusively on short-term instalment plans.

Afterpay has a global customer base in markets across North America, Europe and Oceania, and it has experienced consistent growth since its inception in 2014. The BNPL sector is expected to grow substantially in the near future, and Afterpay/Clearpay is well positioned to maintain its market lead. The company's dedication to user-friendly solutions and easy technical integration makes it a driving force in the payment industry.

This guide will cover what businesses should know about Afterpay/Clearpay: how it works, its primary users and markets, and how to adopt it as a payment method.

What's in this article?

  • How does Afterpay/Clearpay work?
  • Where is Afterpay/Clearpay used?
  • Who uses Afterpay/Clearpay?
  • Benefits of accepting Afterpay/Clearpay
  • Afterpay/Clearpay security measures
  • Working with Afterpay/Clearpay
  • Alternatives to Afterpay/Clearpay

How does Afterpay/Clearpay work?

Afterpay is best known for its popular buy now, pay later service. Afterpay/Clearpay pays businesses the full purchase amount up front, ensuring uninterrupted cash flow as it collects the remaining instalment payments from customers. Afterpay is user friendly and easily integrated into a business's existing payment frameworks, both online and at point-of-sale systems. To use Afterpay, customers must be at least 18 years old and have a valid debit or credit card. Afterpay sets personalised customer spending limits based on creditworthiness to encourage responsible spending habits.

Here's how paying with Afterpay/Clearpay works:

  • Selecting a payment method: During online or in-store checkout, customers select Afterpay/Clearpay as the preferred payment method. After providing Afterpay with basic information, customers receive a spending limit decision instantly. The amount a customer can spend changes over time based on how they use their account, so customers receive an updated spending limit each time they use the service.

  • Paying for a purchase: Customers can complete their purchase with Afterpay by paying only 25% of the total. The remaining 75% is divided into three equal instalments, due in two-week intervals. Late payments may incur a fee. Businesses receive the full purchase amount up front from Afterpay/Clearpay.

  • Returning a purchase: Each business determines its own return policy for purchases made with Afterpay/Clearpay.

  • Checking credit impact: Customers should be aware that Afterpay/Clearpay reports payment history to credit bureaus, which can affect credit scores.

Where is Afterpay/Clearpay used?

Afterpay/Clearpay has made impressive strides in the BNPL sector, expanding its reach to new regions by tapping into local customer behaviours, establishing strategic partnerships and adapting its operations to different regulatory standards. Afterpay's usage in North America, Europe, Asia, Australia and New Zealand is outlined below.

North America

Afterpay has a sizeable market share in North America, where the BNPL sector was valued at over $14 billion in 2022. Afterpay has strategically partnered with popular platforms and payment methods in North America, including major e-commerce platforms, such as Shopify and WooCommerce, and digital wallets, such as Apple Pay and Google Pay. Afterpay has worked to build customer trust in this region, and it operates in compliance with regulations set by the Consumer Financial Protection Bureau.


Among BNPL apps, Clearpay has the second-highest market share in Europe after Klarna. Clearpay tailored its offerings to specific European markets by integrating with popular local payment methods, such as iDEAL and Sofort, and by adopting practices that comply with the EU's General Data Protection Regulation (GDPR).


Afterpay is present in Asian markets and is expected to play a larger role in coming years, with the Asia-Pacific BNPL market projected to increase from US$198 billion in 2023 to US$374 billion by 2028. To expand its role in Asian markets, Afterpay has formed partnerships with major digital wallets such as WeChat Pay and Alipay, and it has concentrated on its mobile-first offerings to support the region's payment preferences. The company is also incorporating artificial intelligence and predictive analytics to further elevate user experiences.

Australia and New Zealand

Afterpay has an extensive presence in its home market of Australia – where 40% of customers reported using BNPL services in the last six months as of April 2023 – and in New Zealand. In these regions, Afterpay leverages its brand recognition and customer affinity, in addition to partnering with major retailers and offering competitive interest rates. Since its inception, Afterpay has operated in compliance with local financial authorities such as the Australian Securities and Investments Commission (ASIC) in Australia and the Financial Markets Authority (FMA) in New Zealand.

Who uses Afterpay/Clearpay?

Afterpay/Clearpay has carved out a substantial niche in the global payment ecosystem. It's a favourite among younger customers, high earners and urban residents, and it has been adopted by businesses across a wide range of industries. Major retailers in clothing, electronics and furniture include Afterpay as a payment method. And it's also integrated with airlines and travel booking platforms, healthcare providers and pharmacies, and even streaming services and entertainment venues. A 2021 report by Clearpay and Accenture found that 47% of Clearpay customers indicated that they would have looked for another store or not purchased a previous order if Clearpay hadn't been available, demonstrating a strong incentive for businesses to adopt the payment method.

Among customers, Afterpay is a popular BNPL option for its ease of use and reliability. Customers have the option to choose Afterpay/Clearpay for in-person shopping and online shopping. The following customer segments are most likely to engage with the service:

  • Younger customers: Generation Z and millennials constitute about 80% of Clearpay's customer base, according to the Clearpay and Accenture report. Younger customers, who are typically more open to trying new technologies and financial tools, have been steadily shifting towards digital payment solutions, contributing to the success of companies such as Afterpay/Clearpay.

  • High earners: The platform is also popular among high-income earners, with the Clearpay and Accenture report showing that Clearpay has more customers in high-income brackets than in the general UK population. This trend could be attributed to their increased purchasing power, in addition to an inclination among higher earners for online shopping.

Benefits of accepting Afterpay/Clearpay

Businesses that accept Afterpay/Clearpay may experience the following benefits:

  • Increased sales and performance metrics: Businesses that accept BNPL options such as Afterpay/Clearpay often see an increase in sales – with 69% of UK retailers reporting improvements in at least one area of their business sales and performance metrics as a direct result of offering BNPL as a payment method.

  • Access to the customer base of Afterpay/Clearpay: By including Clearpay as a payment option, businesses can target Gen Z and millennial customers, who make up over 80% of Clearpay's customers. Another group that businesses can access by offering Clearpay is top-income earners, who use Clearpay more often than the general UK population does. Additionally, Afterpay's expected future growth in Africa and Asia means that businesses offering this payment method can also expand their reach in those markets.

  • Immediate cash flow: Unlike traditional layaway or credit systems, Afterpay/Clearpay pays businesses in full, up front. This immediate payment can drastically improve cash flow, which can be a key factor for small businesses in particular.

  • Reduced basket abandonment: Offering BNPL options can reduce cart abandonment rates by removing payment barriers. Given that the average online basket abandonment rate is around 70%, this reduction can affect revenue greatly.

  • Customer loyalty: The convenience of BNPL payments may increase customer retention rates for businesses, which can be good for revenue – studies show that returning customers spend 67% more on average than new ones.

  • Competitive advantage: In markets not yet saturated with BNPL options, businesses that accept Afterpay/Clearpay can distinguish themselves, especially among price-sensitive customers. Businesses that offer cutting-edge payment solutions are often viewed as more customer-centric and innovative, which can be an important distinguishing feature in markets where brand differentiation is a challenge.

  • Market insights: Partnering with Afterpay/Clearpay can provide businesses with nuanced data analytics, revealing trends and customer preferences that can inform inventory decisions, marketing strategies and even product development.

  • Less liability: By shifting the credit risk to Afterpay/Clearpay, businesses can reduce their financial liabilities. For small businesses in particular, this reduction may be significant, as managing credit risk internally can be costly and complex.

Afterpay/Clearpay security measures

Afterpay/Clearpay enacts several security measures to protect against financial and data-related risks.

  • Data encryption: Afterpay/Clearpay employs advanced encryption methods such as AES-256 to secure data both during transmission and while at rest. This encryption converts sensitive information, such as credit card numbers and personal details, into secure codes to reduce the risk of data breaches.

  • Regulatory compliance: Afterpay/Clearpay adheres to the Payment Card Industry Data Security Standard (PCI DSS), which mandates regular security audits and ensures that the platform maintains a secure environment for handling cardholder data. It also adheres to global data protection regulations, such as the GDPR in Europe, which sets stringent controls on data handling and customer privacy.

  • Two-factor authentication (2FA): Afterpay/Clearpay uses 2FA for customers' accounts, adding an extra security layer that requires not only a password and username, but also a second factor, such as a physical token or an app-based verification method, to authenticate transactions. Identity verification measures include address and phone verification, as well as digital methods such as 3D Secure authentication.

  • Tokenisation: Afterpay/Clearpay employs tokenisation in the payment process. Rather than storing or transmitting actual card details, this security method replaces sensitive payment data with a unique identifier or token.

  • Strong customer authentication (SCA): In jurisdictions such as the European Union, where the revised Payment Services Directive (PSD2) regulation applies, Afterpay/Clearpay implements SCA. This requires electronic payments to be authenticated by verifying at least two of the following elements: something the customer knows (such as a password), something the customer has (such as a mobile device) or something the customer physically is (such as biometric data).

  • Regular security audits and updates: Afterpay/Clearpay undergoes regular security audits to identify and resolve vulnerabilities, ensuring that defences against evolving cyber threats are up to date. Regular assessments and penetration testing are part of Afterpay's approach to identifying and fixing potential security weaknesses.

  • Secure APIs for businesses: Afterpay/Clearpay provides secure application programming interfaces (APIs) for integrating with businesses' platforms. These APIs are designed to ensure that data exchanged between the business's systems and Afterpay is protected.

  • Customer data protection: Afterpay/Clearpay has policies in place for protecting customer data, which include limiting data access to authorised personnel and using secure data storage solutions.

  • Risk management: Afterpay/Clearpay employs real-time transaction monitoring that can detect and respond to unusual activities. The platform uses advanced fraud scoring and machine-learning technologies that evolve continuously based on new data, improving their effectiveness. In addition, velocity limits monitor transaction patterns, adding an extra layer of security against high-volume fraudulent transactions.

  • Data loss prevention (DLP) tools: Afterpay/Clearpay also employs tools to safeguard against internal and external data leaks.

Working with Afterpay/Clearpay

To start accepting Afterpay/Clearpay as a payment method, businesses need to meet specific technical, legal and regulatory requirements. Basic requirements include being registered and holding proper licences in all regions where the business operates and complying with all applicable tax laws and regulations, such as Anti-Money Laundering (AML) and Know Your Customer (KYC) procedures, and data privacy laws, such as GDPR or the California Consumer Privacy Act (CCPA). Businesses must meet the following technical requirements to be able to work with Afterpay:

  • E-commerce platform compatibility: Businesses that want to accept Afterpay need a compatible online store. Afterpay/Clearpay has plugins and APIs to integrate into common e-commerce platforms such as Shopify, WooCommerce and Magento – connecting Afterpay's payment gateway to the business's online checkout system.

  • Stable internet connection: A reliable internet connection is necessary for smooth transaction processing with Afterpay/Clearpay.

  • PCI DSS compliance: Businesses must adhere to PCI DSS for secure handling of card information.

If businesses meet these technical requirements, they can begin the process of getting set up as Afterpay/Clearpay merchants by completing the following steps:

  • Online application: Businesses must submit basic business information and financial details to Afterpay/Clearpay through a secure online application form, in addition to providing proof of business identity and ownership for verification purposes. Afterpay's team reviews the application and provides a decision within a set time frame.

  • Account setup: If the application is approved, businesses must then register with Afterpay/Clearpay to create a merchant account. The business's financial stability and creditworthiness might be evaluated during this process. After registration, businesses must activate the account to set up payments.

  • Integration: Next, businesses need to integrate Afterpay/Clearpay into their payment systems. Businesses can choose from various API-based integration options or use pre-built plugins for popular e-commerce platforms – whichever method best fits their technical capabilities and platform. Integrating Afterpay allows businesses to add this payment method to their checkout processes both in stores and online.

  • Pre-launch testing: Businesses should conduct thorough testing before going live to accept payments. Businesses should also confirm that Afterpay/Clearpay supports their required currencies and countries before integrating this payment method.

Businesses that use Stripe as their payment processor can also set up Afterpay/Clearpay via Stripe. To do so, they'll need to complete the following steps:

  • Confirm that they have an existing active Stripe account: Businesses should confirm that their platform supports both Stripe and Afterpay/Clearpay integrations. They'll have to integrate Stripe's API into their platform if they have not already done so.

  • Activate Afterpay/Clearpay as a payment method: Businesses must activate Afterpay within their Stripe account. This might involve additional verification.

  • Test the functionality: Businesses can test the functionality of the payment method in Stripe's test environment.

  • Ensure compliance with PCI and local laws and regulations: Businesses can display the Stripe user agreement and privacy policy clearly on their websites, covering the use of Stripe and Afterpay/Clearpay.

  • Monitor transactions regularly: After launch, businesses should routinely check for any issues or unusual patterns.

Alternatives to Afterpay/Clearpay

Each of Afterpay's primary markets has a number of competing payment alternatives. In Australia and New Zealand, Afterpay is the BNPL market leader. However, it faces stiff competition from Zip, Humm and Laybuy. In North America, Klarna and Affirm are the main competitors in the BNPL market. Afterpay/Clearpay has a relatively small market share in the European BNPL market – where Klarna dominates – but it's a major player in the UK buy now, pay later market, where its competitors are Klarna and Laybuy.

The main competitors of Afterpay/Clearpay are outlined below:

  • Klarna: Klarna is a Swedish BNPL giant with a strong presence in Europe and North America. It has similar payment options to Afterpay/Clearpay, including "Pay in 4" and "Pay in 30 days" payment plans.

  • Zip: Zip is a rapidly growing Australian BNPL provider with a strong presence in Australia, New Zealand and the US. It offers multiple payment options, including interest-free instalment plans in Australia (that can be set to a weekly, fortnightly or monthly schedule) and a "Pay in 4" option in all other locations.

  • Sezzle: Sezzle is a US-based BNPL company with "Pay in 2", "Pay in 4" and "Pay Monthly" options. It focuses primarily on the US market, but it has recently expanded to Canada.

  • Affirm: Affirm is a US-based BNPL provider with longer-term financing options, typically for larger purchases. It has strong partnerships with major retailers such as Peloton and Wayfair.

  • Laybuy: Laybuy is a New Zealand–based BNPL company with a presence in Australia, New Zealand and the UK. It has a "Pay in 6" payment plan option.

  • Credit cards: While credit cards have different terms and interest rates compared to BNPL services, they are still an alternative for flexible payments.

  • Debit cards and bank transfers: Some banks have "buy now, pay later" features linked to debit cards or bank accounts, providing a similar functionality to BNPL services.

  • Point-of-sale financing: Some retailers have their own financing options at checkout as alternatives to BNPL services.

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