Afterpay and Tyro announce SME payments partnership

Afterpay and Tyro announce SME payments partnership

Payments fintechs Afterpay and Tyro have struck a deal that will see Afterpay’s deferred payment product rolled out to thousands of small businesses using Tyro’s EFTPOS terminals, which compete against those offered by the big banks.

The commercial partnership will allow Tyro, which gained a banking licence last year, to deepen its relationships by integrating Afterpay’s service with point of sale software systems to help customers increase sales.

For Afterpay, the deal will extend its reach into small business, lifting merchant fee revenue, and potentially open up new markets such as medical practices, where Tyro’s terminals are popular. Afterpay’s investors have said one of the big challenges for the young company will be replicating the growth of its online offering in physical stores.

Afterpay, founded three years ago, currently has over 375,000 customers and is offered by over 2100 merchants. Its initial growth came from fashion retail, as the product gained traction with female millennial shoppers. But the company has been expanding into other retail sectors and broadening its customer demographics.

Afterpay’s shares were up 4.2 per cent an hour after the announcement at $2.73, having being issued ahead of the April float at $1.00, delivering big returns to investors including Sir Ron Brierley’s Mercantile Investment Company and Wilson Asset Management.

Afterpay told the ASX the commercial terms of the deal are confidential. Managing director Nick Molnar described it as “an extremely mutual beneficial relationship for both parties”. The company said it had been “receiving strong demand from its existing online retail partners to integrate the Afterpay payment platform into their physical retail store networks”.

Because Afterpay’s product – which pays retailers at the time of the purchase and collects payments from customers in four, fortnightly instalments – doesn’t charge any interest or establishment fees to the customer, it is not technically providing a financial product. The retailer pays a fee to Afterpay, thought to be about 4 per cent of the purchase price, but higher for SME customers.

Gerd Schenkel, chief executive of Tyro and previously head of digital at Telstra, said merchants want more value-added services from suppliers and “being both a bank and tech company, we can do more for them than what we have traditionally done with payments. The banking licence and funding raised last year gives us the ability to take advantage of that opportunity.”


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