Square + AfterPay
E-wallet & payment processor Square is buying AfterPay for $29 billion. Why pay such an enormous sum for an instalment payment (BNPL) facility?
  • AfterPay has rung up > 11 million users, mainly millennials, ~75K merchants, and some $15 billion in yearly sales.
  • Square is established in the US, AfterPay in AU, NZ, UK, CA and growing in the US, thus a synergy of markets.
  • Because it's an all-stock deal, it's like a merger of Square & AfterPay.
  • The goal could be to make AfterPay-Square as ubiquitous as cards as an ecommerce and PoS payment option.
  • The brand name is easy-to-remember vs rivals like Klarna, Pay-in-4.
  • Lowers purchase price hurdle (eg $2000 item is now $500 x 4)
  • Instantly available, no paperwork needed (vs credit cards).
  • No hidden fees (vs credit cards' pay $1000 via $100 per month over 12 months) - except for $10 for each late payment.
  • Postpaid extends customer engagement, which can be parlayed into loyalty and retention.
  • Facility is provided by e-wallet/payment processor/point-of-sale (at customer touchpoints vs banks' backoffice credit cards).
  • Potential for future innovative features (eg. 4th instalment paid by a sponsor upon specific .conditions or pay in 10 instalments: know instantly a $2000 gadget's instalment is $200).
Is easy credit bad for some consumers? AfterPay's position is it's up to consumers and regulators to set limits if such limits are needed (also: BNPL is available only if current payments are up-to-date). For regular consumers, it's just a convenient, deferred payment scheme to replace credit cards (cards are seeing declining interest from youngsters). Unlike credit cards, BNPL does not offer charge back consumer protection but most provide a curated listing of  trusted retailers.

BNPL Startups
  • Affirm - Signs up Peleton, Shopify, Apple and Goldman Sachs
  • Pay-In-4 - Use it with PayPal's millions of merchants
  • Klarna - Pay in 4 instalments, in 30 days, or 36 months
  • Zip - Works with G-Pay and Apple Pay (plus QuadPay)
  • Zilch - Anything you buy is automatically split into 4 payments
  • Pay Later - Apple's nascent, native BNPL facility
  • Seezle - Signs up Target, BigCommerce and Discover
  • Tabby - Shariah compliant BNPL
  • Resolve - BNPL for business-to-business
  • Uplift - Specialises in entertainment and travel industries