As chief investment officer (CIO) of the Guinness Peat Group, Anthony Eisen had responsibility for an international investment portfolio and sat on the boards of several investee companies. He frequently took work home and worked late into the night. Across the street, Nick Molnar was studying for a Bachelor of Commerce at the University of Sydney. At the same time, he was mailing up to 100 parcels a day for his successful online business, BeShop, Australia’s largest seller in eBay’s jewellery and watches category.

Four years ago, when the neighbours finally met, the then 22 year old Molnar was negotiating a deal with one of North America’s largest online jeweller retailers, ice.com, which would go on to give him exclusive rights to sell their products in Australia.

“I was very impressed by the fact that Nick was running such a successful company on his own and I was also impressed by his hard work and dedication,” says Eisen.

Online selling taught Molnar the importance of providing a rewarding customer experience. “On eBay your reviews are public,” he says. “Positive feedback fuels your business so it’s vital that you exceed your customers’ expectations.” He had also seen the benefits of allowing customers to pay for goods in instalments. “My partner company in the US offered this option and customers loved it,” he says. “It also drove sales by encouraging them to shop more frequently.”

Their conversation naturally turned to whether the “buy now, pay later concept” could work in Australia. Molnar and Eisen realised that their complementary skills meant they were well placed to negotiate the local regulatory and retail environments and work with the technology capabilities that either existed or needed to be built.“Right from the start we were looking for a retail-orientated rather than a finance-orientated proposition – one that would be very attractive to customers and would also work very well for retailers,” says Eisen. Their solution: Afterpay. The platform allows customers to take their purchases home then pay for them in four equal fortnightly instalments from a linked debit or credit card. Customers driving growth

In the 18 months to December last year, Afterpay grew from fewer than 10 retailers and a few thousand consumers to more than 2,000 retailers and more than 350,000 consumers. Since listing on the ASX in May 2016, Afterpay Holdings’ share price has risen from $1.00 to $2.65. Eisen has taken on the role of executive chair while Molnar is the company’s managing director.

“As retailers pay a commission, Afterpay doesn’t charge customers any upfront fees or interest charges,” says Molnar. “We are unashamedly in our customers’ favour and that’s why we’ve grown so quickly – when they see the benefits for themselves they’re quick to spread the word. At the same time we have retailers promoting the Afterpay service because they want their customers to remain loyal and buy more frequently.”

Molnar’s strong retail network was very valuable when they were developing the product. “Afterpay went through many iterations in the development stage, often in response to retailer feedback,” he says. “One thing we’ve done really well is to remain open to change. The product we have today isn’t exactly the same as the one that first went live because we continuously analyse our data and optimise what we learn.”

Eisen and Molnar broke new ground with Afterpay and remain unfazed by emerging competition. “In the very general ‘buy now, pay later’ space there have always been multiple consumer finance offerings in Australia and internationally,” says Eisen. “One point of difference for us is that we perceive ourselves as a retail innovations technology company rather than a finance company. This is the way we’ve always presented our product and we believe that’s the reason it has resonated with consumers. Afterpay is not a credit product, so it’s not about filling out loan applications or committing to any form of ongoing credit relationship. We’ve shifted the economics from the customer to the retailer and retailers use Afterpay to enhance their service.”

Customer advocates

Neither Eisen nor Molnar consider Afterpay to be a fintech company. “We’re often filed under that heading and we don’t have a problem with that,” says Eisen. “People tend to use these kinds of definitions pretty liberally and in a technological world, it’s inevitable that there will be some blurring of the lines. But I keep coming back to the fact that we’re focused on retail innovation.”

They also shrug off the idea that they’re disrupters. “We consider Afterpay to be an enhancement to the overall retail and banking system,” says Eisen. “Rather than removing, replacing or disrupting any of the transactions between customers, retailers and banks, we play a complementary role for the benefit of all stakeholders.”

Both Eisen and Molnar consider their customer base to be their greatest achievement. “We understand how retail works and we could see the potential for driving value for retailers. This influenced the way we built the product,” says Molnar. “But we also knew that if we couldn’t get the customers behind it, it wouldn’t work. We needed customers to understand the value of Afterpay and, when you look at the way they have advocated for our brand, it’s clear that they are well educated and well informed. We’re very proud of the enthusiasm with which our customers have promoted the brand by word of mouth.”

They are also proud of the people they have gathered around them. “The business started as just the two of us but since we started working extensively with our technology partners we have built a terrific team,” says Eisen. “That’s very much to Nick’s credit. From the very early days, people from much more established companies decided to join us because they shared his view of the world and his vision. Working with people who are willing to invest so much and give it their all is one of the most rewarding aspects of growing a new business.”

Eisen jokes that with the benefit of hindsight there are hundreds of things he would have done differently, including getting more sleep. “It’s been a pretty intense few years but by the same token, it has been a privilege to have the opportunity to launch and develop the business and see it grow,” he says. Their strategy is still growth-orientated as they focus on scaling their in-store offering with existing online retail partners, moving into new product verticals and exploring international partnerships.

One piece of advice Eisen shares with directors of established companies as well as start-ups is to pay attention to millennials – the generation born between 1982 and 2004. “One of the most amazing aspects of business today is the pace of change in the millennial customer universe and how tech savvy, product savvy and life savvy these people are.

“This goes against a lot of people’s perception of this very large, important and growing sector of the commercial market. Boards should be focusing on the millennial customer base – not to limit their market, but because early adopters and influencers in that sector are already wielding a great deal of power. It’s very important to know what works and what doesn’t work for them.”