We have long been supporters of the Afterpay success story. New information in the FY19 result indicates that the frequency of usage is increasing at a much faster rate than previously expected. We have since remodelled Afterpay’s global GTV with the Australia annual frequency profile.

We now think Afterpay can beat their 2022 sales target of $20bn GTV by at least 70% on a conservative set of assumptions and has the potential to even double guidance in a favourable US/UK scenario. 

Afterpay’s Australia frequency experience

Source: Afterpay

Frequency Model

The thesis is centred on behavioural trends noted in Afterpay’s mature Australian cohorts who are now transacting using Afterpay more than 20x a year – a number which is still growing. We have extrapolated the behaviour of earlier customers across the whole portfolio. The results show 70% upside to Afterpay’s guidance and >40% upside to consensus GTV in 2022

For the analysis, we forecast frequency moving upward from 20x a year in year 3 to 25x in year 5. Then remaining constant at 25x a year thereafter. See frequency profile in chart 3 (note the frequency is averaged for a usage run rate).

We estimate $34bn GTV in FY22

Source: Watermark funds management

This is our frequency profile based on APT's chart

Source: Watermark funds management


Beyond our frequency changes our analysis is based upon a conservative set of assumptions:

  1. Australian additions decline
  2. The rate of US customer additions stays flat going forward (realistically it is increasing)
  3. The rate of UK customer additions stays flat going forward (realistically it is increasing)
  4. Basket size stays flat at $150 (it increased over 2019), there is also upside from Afterpay’s new variable payment upfront option which allows for higher basket size
  5. Whilst we don’t include churn we think this is more than captured within our conservative additions forecasts
  6. We only expect a slight tick up in frequency before it moderates

As such we see additional upside to our GTV forecast based on the level of conservatism, particularly around customer addition rates.


Below is our modelling by country and cohort – we simply grow annual frequency trends seen in Australia as per are extrapolation in chart 3 (above).

Gross transaction frequency modelling by cohorts


The impact of this frequency change on GTV is significant. For instance, even if Afterpay didn’t add any new customers in ANZ in 2020, it would still see an uptick in ANZ sales of 50% - merely from older cohorts increasing frequency.

These results took us by surprise. It sees Afterpay beat its FY2022 target by more than 70%, this is with the rate of customer additions flatlining in the US and UK (we consider this unlikely). We also understand consensus sits at around $24bn in FY22, this sees >40% upside to consensus volumes.

Beyond this, we also believe that Afterpay has the potential to beat the net transaction margin guidance of 2% due to the scalability of its GTV. This sees Afterpay hit an inflexion point quicker in the US and UK (but we will save this analysis for another article).

Sunny Sleeper

What's GTV? Thanks

Harry Dudley

Hi Peter, GTV = Gross Transaction Volume, also referred to as Gross Merchant Volume. This is the amount of underlying sales that are transacted through Afterpay.

Garry Robinson

Same scenario applies to Zipay. With Zip also attacking the SMS finance market thats would see Zippay increasing by the same multiples

Oliver Cay

I am interested in your thoughts on whether Afterpay will be able to maintain the transaction margin they are currently charging the retailer? 3.5-5 % on the sale value including returns (25-40%). Despite the customer wanting to use Afterpay, the retailers might switch or promote a cheaper competitor? eg Humm or Zippay. Afterpay may be able to achieve your projected GTV but if it has to lower the margin it will hurt their profitability.