Square Inc. is Acquiring Afterpay
The founders of Cash App, fintech company Square Inc. are buying Australian service Afterpay, a buy-now-pay-later service
The founders of Cash App, known to be a competitor for apps such as Venmo, Apple Pay and Google Pay, fintech company Square Inc. are buying Australian service Afterpay, a buy-now-pay-later that is similar to the likes of Klarna and Affirm, and also Apple’s upcoming BNPL service that is internally being named ‘Apple Pay Later’. In what is possibly one of the biggest acquisitions in Australian history, the all-stock deal is worth around $29 billion, and people are already speculating whether Square will be paying in four instalments of $7.25 billion in shares. This is the most recent significant step for Square, earlier this year they announced a Bitcoin business unit and has also purchased a majority stake in the high-quality Norwegian streaming service Tidal.
The service Afterpay provides allows customers to choose to pay in smaller instalments across four two-week intervals, rather than the full price all at once the fees for their service will be applied if you’re late to make payment, where the minimum charge is $8 and the maximum charge of 25% of the item’s full price. The acquisition from Square is seemingly natural, as Afterpay offers a service which many customers are interested in, especially the younger generation and Square is a major player in fintech. Afterpay is a leader in the industry and won the 2020 Aite Group Impact Innovation Award in Digital Wallets for customer experience. According to a press release, as of June 2021 Afterpay serves over 16 million customers and around 100,000 merchants across the world, including major retailers in a range of niches such as beauty, sporting goods and homewares. The acquisition should be completed in the first quarter of 2022, and once this has happened, Square will appoint an Afterpay director to join their board.
“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,” Square co-founder and CEO Jack Dorsey said in a statement. “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.”
The merge between the two companies will greatly benefit each other, Afterpay has a global merchant base that will boost Square’s growth with larger geographical coverage, introduce new and bigger Square sellers and consumers. Cash App’s product offering will be helped along by Afterpay, helping customers to manage repayments and offer more sensible solutions, all the while new merchants will be discovered once the apps are integrated with one another. Square has a customer base of around 70 million, of which will expand Afterpay’s reach both online and in person, also allowing their consumers to benefit from Cash App’s financial tools such as stock and Bitcoin purchases and money transfers.
Apps and services such as Afterpay and Klarna have received a fair amount of backlash for encouraging younger people and people who are already strapped for cash buying into possible debt for items that aren’t needed but wanted. The pandemic increased spending on items that are not of necessity online and “pandemic depression buying” has already led many into the whirlpool of debt, whilst being bored at home and seeing attractive offers online. The myth that surrounds the whole buy now, pay later scheme is that it allows customers to be more in control of their money, whereas in reality, as mentioned, it can be the start of a lifetime of debt without people realising it’s happening. The idea of it sounds great to people who can’t buy expensive things in one payment, but it is basically a payday loan, and if they aren’t paid on time it can soon rack up a number of unforeseen expenses.
"By combining with Square, [Afterpay] will further accelerate our growth in the U.S. and globally, offer access to a new category of in-person merchants, and provide a broader platform of new and valuable capabilities and services to our merchants and consumers," said Afterpay co-founders and CEOs Anthony Eisen and Nick Molnar.
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