The all-stock acquisition is planned to close in the first quarter of 2022 and would see two of the world’s fastest growing fintech companies join together, in an attempt of bringing the BNPL model to consumers and merchants across the world.
Jack Dorsey’s Square intends to use the acquisition to accelerate integration of BNPL technology into its existing Seller and CashApp systems, which serve merchants and individual consumers across the world.
“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 stated in the release.
The company’s gross profit is up 91% from last year, showing a record quarterly growth rate for the company which also showed an impressive $1.96 billion in second quarter revenue.
Founded in 2015, Afterpay has quickly become one of, if not the premier fintech of Australia. The company’s platform allows customers to pay in four interest-free installments for purchases, with a set fee placed on late payments.
Over 16 million customers currently use the service and will have access to Afterpay’s model on Square’s CashApp platform, along with the 40 million monthly active existing CashApp customers, according to CNBC.
“Merchants pay for the Afterpay experience, but they get higher average order volumes, they get greater conversion, they get greater frequency and lower returns and they get a marketing channel from Afterpay … which is ultimately helping those merchants grow there business and that’s what Square is all about,” Square CFO Amrita Ahuja said in an interview with CNBC’s Squawk on the Street Monday.
While Afterpay has shown impressive revenue and growth in recent years, the purchase is still a 31% premium over its market value, according to Forbes.
The BNPL segment has been growing rapidly worldwide, with the technology trending in popularity for younger consumers who are hesitant to use traditional credit cards and loan debt. Afterpay entered the US market in 2018, and has since risen to serve over 100,000 merchants globally, according to CNN Business.
I recently talked to Lauren Morton, partner at QED Investors about the success and obstacles of BNPL in Latin America, with conversation about the model in general and what it takes for it to succeed. You can find that interview here.