Should Afterpay prioritize expanding its merchant network or focus on increasing user adoption of its existing BNPL service?

Introduction

The trade-off between expanding Afterpay's merchant network and increasing user adoption of its existing Buy Now, Pay Later (BNPL) service presents a critical strategic decision. This scenario involves balancing growth vectors in a competitive fintech landscape. I'll analyze this trade-off by examining key business factors, user impacts, and potential outcomes to provide a data-driven recommendation.

Step 1

Clarifying Questions (3 minutes)

• Based on recent market trends, I'm thinking Afterpay might be facing increased competition. Could you provide insights into our current market share and the competitive landscape?

Why it matters: Helps assess the urgency of expansion vs. consolidation Expected answer: Moderate market share with growing competition Impact on approach: Would influence the balance between aggressive expansion and user retention strategies

• Considering our revenue model, I assume we earn primarily from merchant fees. What's our current revenue split between merchant fees and any user-facing charges?

Why it matters: Determines which growth vector directly impacts our primary revenue stream Expected answer: Majority revenue from merchant fees, small portion from user fees Impact on approach: Would prioritize merchant network expansion if merchant fees dominate

• Looking at user behavior, I'm curious about our current user retention rates and frequency of BNPL usage. Can you share these metrics?

Why it matters: Indicates whether we need to focus on acquiring new users or activating existing ones Expected answer: Moderate retention with room for improvement in usage frequency Impact on approach: Low retention would shift focus towards improving the existing service

• Regarding our technical capabilities, how scalable is our current platform for onboarding new merchants versus handling increased user transactions?

Why it matters: Identifies potential technical bottlenecks in either growth strategy Expected answer: Platform is more scalable for user transactions than merchant onboarding Impact on approach: Would influence resource allocation between platform improvements and expansion efforts

• Considering our current team structure, do we have dedicated teams for merchant acquisition and user growth, or is it a shared responsibility?

Why it matters: Helps understand our operational readiness for either strategy Expected answer: Separate teams with some overlap in responsibilities Impact on approach: Would inform how we structure teams and allocate resources for the chosen strategy