Square to Acquire Afterpay, Integrate BNPL Into Existing Platforms
FinTech giant Square is once again looking to expand its reach and venture into other aspects of finance — this time setting its sights on “buy now, pay later” (BNPL). Over the weekend, Square announced plans to acquire the Australia-based service Afterpay. With the deal anticipated to be paid in stock, the implied value of the transaction is $29 billion based on Square’s share price as of July 30th. The transaction is expected to close in the first quarter of calendar year 2022.
Following the acquisition, Square says it intends to integrate Afterpay into its existing ecosystems, including Cash App and its Seller platform. For example, small businesses that utilize Square would be able to offer BNPL options to customers. In turn, those buyers would then be able to manage their payments using the Cash app.
Commenting on this aspect of the acquisition, Square co-founder and CEO Jack Dorsey stated, “Square and Afterpay have a shared purpose. We built our business to make the financial system more fair, accessible, and inclusive, and Afterpay has built a trusted brand aligned with those principles. Together, we can better connect our Cash App and Seller ecosystems to deliver even more compelling products and services for merchants and consumers, putting the power back in their hands.”
Square’s planned purchase of Afterpay comes as “buy now, pay later” services such as Klarna, Quadpay, Affirm, and others have seen surging demand. These platforms typically allow consumers to finance purchases without paying interest, provided that they pay off their balance within the specified timeline. In the case of Afterpay, consumers pay off their purchases over the course of six weeks — paying one-quarter of the total price upfront followed by three other installments spread two weeks apart. Notably, the platform also recently launched a rewards program for users that includes additional perks such as the ability to delay payments and more.
Amid the growing popularity of BNPL services, there have also been criticisms leveled against such platforms. In fact, in Afterpay’s native Australia, a TV spot for the company featuring actress Rebel Wilson was pulled following a petition by the group Financial Counselling Australia. The ad — which can also be seen stateside — features Wilson describing the service as, “If credit cards and cash had a baby, you could pay it over time without ever paying interest,” with the organization taking particular issue with the fact that Wison was addressing a child in this scene. An Afterpay spokesperson initially defended that ad, saying, “The scene that includes a child and parent is a humorous way for Afterpay to demonstrate the simplicity and transparency of our product, especially when compared with much more expensive and risky products such as credit cards.”
Given the controversy that BNPL services are already enduring, it’s safe to assume that news of this deal will be met with some blowback. However, it’s unclear whether any potential flack might ultimately dissuade Square (or Afterpay, for that matter) from moving forward. Meanwhile, it’s also interesting to note how the proposed deal speaks to both sides of Square’s business, offering something for small business customers and Cash app consumers at the same time. In that aspect, the purchase could make a lot of sense — although we’ll need to see how the plan is received by regulators and the court public opinion.