Australian point-of-sale lending company Afterpay is quickly expanding its reach among U.S. retailers. It’s promoting its products as a means to grow its customer base and increase purchase volume. As of May, Afterpay had 1.5 million U.S. customers and 3,300 merchants using its platform, including Anthropologie, Levi’s and Urban Outfitters. The company said 1,100 more retailers are in the process of adding its feature.

With companies such as Affirm, Bread and Klarna providing point-of-sale loans at U.S. retailers, the company faces increasing pressure to differentiate. Afterpay, which launched in the U.S. in May 2018, told Bank Innovation that it will emphasize to U.S. retailers that its interest-free loans increase conversion rates, increase basket sizes and decrease return rates — advantages other point-of-sale loan companies also tout to merchants.

A spokesperson for the company said Afterpay provides a customer acquisition lift to U.S. retailers by driving customers to their websites. According to the company, the POS lender drove more than 3 million customers to its retailers’ websites in May. The company did not comment on how many of these site visits led to sales.

Afterpay charges merchants 4-6% of the transaction, but it doesn’t charge interest on customers’ four biweekly payments. Customers pay for late fees, but those are capped at 25% of the purchase total. Afterpay also doesn’t require a credit check.

Jen Redding, a senior consumer analyst at Wedbush Securities, said merchants don’t mind the transaction charge because Afterpay increases basket size. Afterpay also has increased conversion rates, or the number of people who go to a merchant’s website and actually buy something, by 30%, she noted.

Affirm and Bread both charge interest on their point-of-sale loans, but Klarna does not. Charging interest allows a point-of-sale lender to offer better rates to retailers, but Forrester Research principal analyst Alyson Clarke said this doesn’t necessarily give them the upper hand. In order to convince retailers to accept the extra cost, Afterpay must market how easy it makes shopping, she noted. 

Afterpay likely is looking to reach younger customers, a market also sought after by its competitors. At the CB Insights Future of Fintech Conference in New York on Wednesday, Affirm CEO Max Levchin noted that 67% of the company’s customers are Generation X and younger. He said the clarity of Affirm’s loan terms appeal to younger customers who don’t want to get trapped in credit card debt.

Despite the quick growth of point-of-sale loan companies, Clarke is concerned about how the model will fare during a recession.  “If [point-of-sale lenders] have brands that sell things that consumers consider more necessary than discretionary, that’s going to impact the survivability,” she said.