Square to purchase Afterpay, a buy now, pay it later player for $29B

Square to purchase Afterpay, a buy now, pay it later player for $29B

Dive brief:

  • Square intends to buy Afterpay, an Australian buy-now, pay-later company, for $29 billion. The company stated in a Sunday press release that the deal will close by the end next year.
  • Afterpay was established in Sydney in 2015. It has grown to be one of the most prominent players in the growing buy now, pay late market. Afterpay boasts 16 million customers and 100,000 merchants in fashion, homewares and other retail areas around the world who have signed up for its services. The release stated that Afterpay is available in Australia, Canada, New Zealand and the United States.
  • The release stated that Square plans to integrate Afterpay in its existing Cash App and Seller business units. This will allow even the smallest merchants to offer BNPL when they check out, give Afterpay customers the ability manage their installments directly in Cash App, and give Cash App customers access to merchants and BNPL deals directly within the app.

Dive Insight

Square CEO Jack Dorsey has announced the acquisition to further his ambitious plans to expand his merchant and banking empires in new retail areas and around the world. Square’s merchant business will be able to add more retailers to its network, reach new geographical regions, and its Cash App digital payments unit (which will allow users to manage their spending and connect to more retailers) will benefit from the acquisition, according to the release.

At $29 billion, or $92.66 per share, the acquisition is Square’s biggest, and provides a 31% premium for the stockThe Wall Street Journal reported, noting that Dorsey came into contact with the co-CEOs of Afterpay through their philanthropic interests.

Square, a San Francisco-based company, was founded in 2009. It claims it has millions of merchants who use its square technology to sell their products and services. Since its inception, the mobile payment platform business Square was used to send and receive money. Later, it added ways to store, spend, and invest money.

The company has also been aggressively pushing into banking services, launching its Square banking and lending products for merchants earlier this year. That followed a doubling of Square’s annual net revenue last year over 2019 to $9.5 billion, as net income slid to $213 million, according to its annual filing with the Securities and Exchange Commission.

Square claims the combination will allow it to serve a younger customer that is moving away from traditional banking and credit lines, and merchants who are looking for new digital avenues to grow their reach and expand their businesses. The Afterpay deal will allow Square to expand its reach beyond the U.S., Canada and Japan to include Australia, Ireland, Spain Spain, Norway, Norway, Australia, Ireland, Ireland, Spain, Norway and Australia.

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Afterpay was one of a number of buy now and pay later players, along with its big Swedish rival Klarna. It sought to gain traction in America. Larger legacy players such as credit card companies have started offering their own buy now, buy later services.

Both companies claim they are eager to give more power to consumers to allow them to pay for goods and services with less hassles than credit cards. Afterpay allows consumers to pay no interest in four equal installments, while retailers will foot the bill. Square released that the merger “brings together the fastest-growing global fintech companies to advance the shared mission of economic empowerment, and financial inclusion.”

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Dorsey stated in the release that Afterpay and Square share a common purpose. Afterpay is a trusted brand that aligns with these principles. “We created our business to make financial systems more fair, accessible, inclusive and inclusive. Dorsey also serves as CEO of Twitter, a social media company.

Still, some regulators in Europe, where the buy now, pay later trend has caught on more than in the U.S., have recently been considering measures to make sure they’re safeguarding consumers being drawn to the lending arrangement. It doesn’t conform to the U.S. consumer finance laws because consumers don’t have to pay any fees other than late payments. The industry participants this year stepped up with their own code of conduct, likely in a bid to head off onerous regulations.

Square stated in the release that it “empowers customers” to purchase the items they need and wants, but it also promised retailers that it could help them grow their business through bigger tabs and repeat sales.

In a press release, Afterpay’s cofounders and coCEOs, Nick Molnar and Anthony Eisen, stated that “By combining Square, we will further accelerate growth in the U.S., globally, offer access to an new category of in-person retailers, and provide a wider platform of new and valuable capabilities, services to our merchants as well as consumers.” Afterpay’s co-CEOs will continue to be Afterpay’s chief executives and join Square.

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