Payments

Cheat Sheet: Square’s acquisition of Buy Now, Pay Later firm Afterpay

  • This is a $29 billion all-stock deal.
  • The deal appears to be mutually beneficial for Square and Afterpay.
close

Email a Friend

Cheat Sheet: Square’s acquisition of Buy Now, Pay Later firm Afterpay

Square announced that it’s buying buy now, pay later Afterpay. This is an important tie-up for both companies as they both benefit from each others’ audiences and merchant bases. 

Details 

  • On August 1, Square announced that it was buying Afterpay in an all-stock deal valued at $29 billion. 
  • The deal is expected to close some time early next year.
  • Once the deal closes, Afterpay’s co-founders and co-CEOs Anthony Eisen and Nick Molnar will join Square. In doing so, they’ll lead Afterpay’s merchant and consumer businesses. 
  • Square also intends to place an Afterpay director on its board.

Square will integrate Afterpay into its Seller and Cash App units and Square merchants will have the option to offer installment payments at checkout. Similarly, Afterpay users can manage their installment payments directly in Cash App. Cash App users will also be able to find BNPL offers within the app.

Square

Cash App stands to benefit a lot from an integration with Afterpay, considering that the BNPL has a higher caliber of consumers. 31% of Afterpay users make $100,000, compared to only 13% of Cash App users, according to a Cornerstone Advisors study. Square wants to increase its pool of higher-income consumers because they undoubtedly have more spending power, which Square needs to attract and retain new merchants to its platform.

Bringing Afterpay’s 100,000 global merchants into its own ecosystem is another big incentive for Square.

SPONSORED

Afterpay

Since launching in the U.S. in 2018, Afterpay has penetrated just 2.5% of the U.S. market compared to 14% of Australia/New Zealand market, where it has 3.4 million customers. That’s not to say Afterpay has done a bad job of expanding and growing in the U.S. — it has twice as many users in the U.S. as it does in its native region — just that American consumers have been slower to adopt BNPL services.

Integrating Afterpay into Cash App would expose the BNPL to millions of more customers and and sellers, expanding Afterpay’s presence in the U.S. market online and offline. Afterpay customers would also have access to Cash App’s features including money transfer, stock and Bitcoin purchases, Cash Boost, and more.

What’s the word? 

Buy now, pay later has proven very popular with Gen Z and Millenials with one eMarketer report suggesting that the two generations accounted for 75% of all BNPL users in the U.S. Not only has the installment program won the hearts of the young, but it’s also expected to grow tremendously in the next few years. By some estimates, BNPL services are expected to grow 181% by 2024 in North America.

Given the growth and interest in the space, companies are looking to get a piece of the BNPL pie. Last month, it was reported that Apply Pay was introducing a BNPL solution with Goldman Sachs called Apple Pay Later. Visa has also quietly been making moves to implement a BNPL feature under its own umbrella for its credit-card-issuing customers. 

0 comments on “Cheat Sheet: Square’s acquisition of Buy Now, Pay Later firm Afterpay”

Member Exclusive, Payments

Payments Briefing: Is the ‘Apple Pay Later’ hype warranted?

  • This week, we review the hype around Apple Pay Later and try to determine how much of it is justified.
  • We also look at Square’s move to bring Afterpay to in-store purchases, making it even easier to pay in four – and how this greater ease could lead to overspending and growing consumer debt.
Ismail Umar | June 23, 2022
Member Exclusive, Payments

How the global microchip shortage is affecting the payments industry

  • While chip-based payment cards face the biggest threat, experts say the only aspect of payments immune to the shortage is physical currency.
  • As banks look to address the problem, one of the solutions being discussed is extending payment cards' expiration dates.
Subboh Jaffery | June 20, 2022
Payments, Podcasts, What's Happening in Payments Podcast

What’s Happening in Payments Ep. 8: Klarna and the future of BNPL, PayZen’s ‘Care Now, Pay Later’, and Mastercard’s ‘Smile to Pay’ system

  • This week, we discuss whether BNPL offers a sustainable business model for providers, and whether it’s even viable as a standalone business.
  • We also talk about PayZen’s ‘Care Now, Pay Later’ offering, as well as Mastercard’s ‘Smile to Pay’ system, and what it tells us about the future of privacy and security in payments.
Ismail Umar | June 17, 2022
Payments, Sponsored

International remittances: A money movement lifeline ripe for digitization

  • Digital transformation is simplifying how people move money around the world, yet barriers to international P2P transfers remain.
  • In honor of International Day of Family Remittances, Visa shares four tips for how policymakers can better streamline digital remittances.
Visa | June 16, 2022
Member Exclusive, Payments

Payments Briefing: PayZen wants to combat rising medical debt with ‘Care Now, Pay Later’ solution

  • This week, we explore how PayZen uses a variant of BNPL to tackle healthcare affordability in the US.
  • We also hear from Stax CEO Suneera Madhani on the gender gap in fintech.
Ismail Umar | May 26, 2022
More Articles