Addressing Afterpay's Rolling Reserve Policy Challenges: A Systems Thinking Approach
Introduction & Background
This post examines issues faced by Afterpay Ltd (Afterpay), a financial technology company owned by Block Inc. Afterpay provides payment solutions that allow consumers to buy products immediately and pay for them in installments over time. The business offers its solutions across five nations - Australia, New Zealand, the United States, Canada, and the United Kingdom. Headquartered in Melbourne, Afterpay aims to make purchasing more accessible while helping retailers increase sales (Afterpay Ltd, 2024). However, the company recently faces challenges that threaten its continued growth.
Afterpay Ltd created a "rolling reserve" system to mitigate risks. This policy allows Afterpay to withhold a percentage of retailers' sales up to 90 days. The practice holds back significant funds up to 30% severely impacting retailers and undermining Afterpay's brand image (Turner-Cohen, 2023).
Discussion
To better understand the complex problem involving diverse stakeholder perspectives, the initial steps of Soft Systems Methodology (SSM) a structured approach developed by Peter Checkland in the 1970s should be employed: identify the problem, explore it, and describe the ideal system (Mehregan et al., 2020, p.427).
Step 1: Afterpay implemented a "rolling reserve" policy that had a significant detrimental effect on the businesses that offered Afterpay as a payment option.
Step 2: Rich pictures, a systems thinking tool, can help Afterpay holistically understand the rolling reserve policy issue by visually capturing diverse stakeholder perspectives, goals, and tensions that need to be addressed (Monk & Howard, 1998, p.22).
Fig.1: Rich picture of AfterPays rolling reserve issue
The rich picture (see Fig.1) reveals tensions between Afterpay, partners, and customers around the rolling reserve system, where funds are withheld as a buffer against customer non-payment. Despite interdependence, there is a lack of transparency, communication, and resolution of conflicting needs.
Step 3: In this step, each work process is carefully looked at to find the problem or part that needs to be changed to fix the main issue. This detailed review is done using CATWOE analysis. CATWOE explains how the business processes are turned into system processes and why this change is happening (Memon et al, 2016).
Table 1: Afterpays CATWOE analysis.
The introduction and rapid growth of Afterpay LTD have had several intended and unintended consequences on various stakeholders.
Table 2:Intended and unintended stakeholders consequences.
Recommendations
Pay interest to sellers on reserves held over 30 days to offset their costs. Promote transparency by clearly explaining reserve criteria upfront, including rationale. Provide documentation on specific actions sellers can take to reduce rolling reserves, empowering them to manage this aspect. These demonstrate fairness and can strengthen Afterpay's seller partnerships.
Conclusion
Applying systems thinking methodologies provides Afterpay with a comprehensive perspective on the challenges surrounding its rolling reserve policy. Techniques like rich pictures and CATWOE analysis reveal the stakeholders, motivations, and consequences - both intended and unintended. Rather than isolated policy adjustments, a systems approach enables Afterpay to reformulate reserve practices in an ethical, sustainable manner that fosters growth while preserving its core value proposition.
Are you struggling to keep up with the demands of your academic journey? Don't worry, we've got your back!
Exam Question Bank is your trusted partner in achieving academic excellence for all kind of technical and non-technical subjects. Our comprehensive range of academic services is designed to cater to students at every level. Whether you're a high school student, a college undergraduate, or pursuing advanced studies, we have the expertise and resources to support you.
To connect with expert and ask your query click here Exam Question Bank
