The news: On-demand delivery provider DoorDash added buy now, pay later (BNPL) firm Afterpay as a payment option for its Australian customers, per a press release. Customers can pay for DoorDash orders and DashPass subscriptions in four interest-free installments.

What it means: Afterpay and DoorDash can help each other mitigate competitive pressures.

Afterpay can extend its business into a new consumer market to stand out from competitors.

• Afterpay and other BNPL firms are moving into industries outside of direct retail in search of new growth opportunities, as banks and startups ratchet up the competition. Last month, Afterpay and US-based Sezzle both forged healthcare-related deals.
• On-demand delivery remains largely untapped by BNPL, and Afterpay may be looking to gain an early mover advantage and reach a new base of customers. And because DoorDash only launched in Australia a few years ago, the brand’s partner network still has room to grow.
• That gives Afterpay more opportunities to boost sales in a major market: It reported AUD 9.4 billion ($7.01 billion) in underlying sales in Asia Pacific in its fiscal 2021 (ended June 30, 2021). Afterpay may look to expand the partnership to other markets if it goes well in Australia.

DoorDash can use Afterpay to attract a broader audience and compete with local providers.

• Australia has one of the highest BNPL penetrations in the world: 45% of digital buyers in Australia have used BNPL, per a 2021 PayPal report. And last year, 11% of ecommerce payments in Australia were made with BNPL, per FIS. DoorDash can capitalize on consumer interest in BNPL to grow its brand in Australia, where it competes with providers like Deliveroo and Just Eat.
• DoorDash’s partnership with Afterpay is another example of providers using payments integrations to offer customers more convenience: Uber Eats added a bill-splitting tool to its app on Wednesday, and DoorDash recently agreed to acquire restaurant tech firm Bbot to give restaurant customers more digital ordering and payment solutions.

The problem: Bringing BNPL products to on-demand delivery may reinforce financial concerns related to BNPL, including overuse and overspending. In the US, the average DoorDash order is $37.28, per Business of Apps. Using BNPL for low-dollar-value purchases like these might encourage negative purchasing behavior, especially in younger consumers.