Payment app Square has agreed on a deal to purchase Afterpay, an Australian-based mobile payments company for $29 billion. The announcement was made by Square on Sunday.
Afterpay offers a “buy now, pay later” service and launched in the US for the first time in 2018. Ever since the app has gained momentum in an industry that has also been attracting a lot of attention from big companies.
Buy now and pay later has become quite huge in e-commerce and there are in fact some reports that Apple is working on a similar product that will be incorporated into its digital wallet. Square is owned by Jack Dorsey, the CEO of Twitter and the company indicated that the acquisition of Afterpay will be integrated into its Seller and Cash programs.
Afterpay allows users to make purchases with the opportunity of paying later in four installments. These payments are paid every two weeks. However, the user must pay a 25% deposit for the item they intend to buy. The remaining installments are charged automatically to the user and if they’re not able to make it, fees will be imposed.
Afterpay will then proceed to lock out their account until full payment is done. This typically means that users will not be able to access the service until the money owed is cleared. A statement released by Square's CEO shortly after the deal was announced noted that both of these companies are similar in their approach.
The statement went on to argue that the partnership between the two companies will work towards developing a “financial system that is fair, accessible, and inclusive for everyone.” Dorse has been building his presence in financial services off late.
The acquisition of Afterpay comes a few weeks after the Twitter CEO announced that Square was working on a new business that would help Bitcoin developers to create financial services products.
It’s not clear though what the end game will be here but it seems Square is moving fast to consolidate its place as one of the most promising fintech providers in the world. Square has after all managed to develop a very comprehensive merchant payment network in recent times.
The company is the owner of Cash App, which has proven to be a notable high-growth consumer payment service that is projected to grow even further over the coming years. Now that Afterpay is coming aboard, both these companies combined will have a customer base of millions of consumers and an extensive merchant network that will make integration quite seamless.
Nonetheless, although the acquisition deal has been agreed on principle, there was no mention of when it may be finalized. Typically, most of these takeover deals don’t last that long but there are of course a few regulatory procedures that need to be done.
Most analysts expect the deal to close in a few weeks though. At the time of its acquisition, Afterpay had 16.2 million active users.