Square, Jack Dorsey’s financial services company, is set to acquire Afterpay for approximately $29 billion (£20.8 billion), breaking the record for a completed Australian buyout.
Afterpay is a ‘buy now, pay later’ (BNPL) platform that lends shoppers, who are exempt from credit checks, money they can pay off later, interest-free.
Square plans to integrate the platform into its existing Seller and Cash App business units and allow “even the smallest of merchants” to offer BNPL at checkout.
Afterpay consumers will be able to manage their payments directly through Square’s Cash App and it will also give Cash App customers the ability to view merchants and BNPL offers through the app.
“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,” said Jack Dorsey, co-founder and CEO of Square. “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.”
Afterpay currently serves over 16 million consumers and nearly 100,000 merchants globally. The company claims it is “deeply committed” to helping people spend responsibly without incurring service fees for those who pay on “time, interest, or revolving debt”.
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Square stated it views BNPL as an “attractive opportunity” supported by shifting consumer preferences away from traditional credit, “especially among young consumers, consistent demand from merchants for new ways to grow their sales, and the global growth in omnichannel commerce”.
BNPL firms tend to make money from merchant commission and late fees, and not interest payments, which allows them to bypass the legal definition of credit and credit laws, as reported by Reuters. Due to this, BNPL providers do not need to run the same sort of background checks on new accounts as that required by credit card companies.
The $29 billion deal is expected to close in the first quarter of 2022 and also breaks the record for a completed Australian buyout, which was previously held by the $16 billion sale of Westfield’s global shopping mall empire to Unibail-Rodamco in 2018.
Last month, Apple was reportedly working on a new service to allow consumers pay for any Apple Pay purchase in instalments over time, rivalling the BNPL offerings from services like PayPal, according to Bloomberg. The service is reportedly called internally ‘Apple Pay Later’ and will use Goldman Sachs as the lender for the loans needed to support payments.
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Zach Marzouk is a former ITPro, CloudPro, and ChannelPro staff writer, covering topics like security, privacy, worker rights, and startups, primarily in the Asia Pacific and the US regions. Zach joined ITPro in 2017 where he was introduced to the world of B2B technology as a junior staff writer, before he returned to Argentina in 2018, working in communications and as a copywriter. In 2021, he made his way back to ITPro as a staff writer during the pandemic, before joining the world of freelance in 2022.