For three days each week during the month of April in 2014, a seasoned product manager named Lulu Young, an engineering manager named Paul Connolly, and a 24-year-old jewelry salesman named Nick Molnar gathered in a bare, windowless conference room in Melbourne to hash out the features and functionality of a financial product that existed only in Molnar’s head. The goal was to appeal to two constituencies at once: online retailers, who were always eager to convert more virtual browsers into actual shoppers; and consumers, some of whom didn’t have credit cards but, Molnar thought, might still like a way to get their goods first and then pay for them over time.
The product that emerged gave would-be users two options, both of them interest-free, which placed them outside Australia’s credit regulations. The first was called Pay After Delivery, which let people wait 30 days before handing over any money, not unlike using a credit card. The second option, Pay Over Time, let people split their bill into four installments. It didn’t take long for Young and her colleagues to agree on the structural details: They’d need to let people stretch payments over more than 30 days, but “we didn’t think that a much longer period was necessary and looked at 60 days,” she says. “Two payments made it too similar to the existing paradigm: payments roughly every month. The mental gymnastics for four was straightforward—halve any number and halve that again.”
They called the service Afterpay. Later that year, shoppers at the jewelry website Molnar had started with his brother and their jeweler parents were the first to encounter the two “new” ways to pay. A hoped-for flood registered as little more than a trickle, and it didn’t take long to see that the Pay After Delivery option wasn’t resonating much at all. The mood shifted when Princess Polly—a website that today bills itself as “the ultimate global fashion destination for trendsetters who want the latest Insta-ready, TikTok-approved, celeb-worthy looks” and whose young female clientele didn’t include many holders of credit cards—experimented with the pay-in-four option in May 2015. The system sent Young an email each time someone chose to pay in four. “The trickle of orders became a steady stream almost overnight,” she says. “I quickly got rid of the alert.”
