SAN FRANCISCO–Two giant fintech players have announced a deal in an ongoing effort to provide an alternative to traditional credit cards.
Square said on Sunday that it planned to acquire the Australian “buy now, pay later” (BNPL) company Afterpay in an all-stock deal that values Afterpay at about $29 billion.
According to the companies, the deal will introduce Afterpay’s service, which allows users to spread the cost of their purchases over interest-free installments, to U.S. consumers and the millions of small businesses that process their credit card transactions on the Square app. It will also help Square further expand in Australia, its second-biggest market after the United States.
As CUToday.info has reported, BNPL has been one of the fastest-growing areas of lending during the pandemic.
More Than 70-Million Customers
The New York Times noted that Square’s Cash App, a payment platform with more than 70 million customers, has been a key point of growth for the company, particularly during the pandemic as customers have sought out cash-free options. The company has been looking to integrate that app and its “Seller App” platform for smaller businesses, the Times added.
According to the report, Afterpay works with more than 16 million consumers and nearly 100,000 merchants globally.
Both companies have positioned themselves as rivals to the traditional banking stalwarts, the Times stated.
‘Flipped the Model’
“There’s a lot of growth occurring in this shift away from credit to debit, and it’s due to the fact that we’ve flipped the model on its head,” a company founder told the Times in an interview, adding the banks’ credit model “doesn’t work.”
“The incentive is the opposite of how we built our product, which is to charge the retailer a small fee instead of making our money from the consumer,” the cofounder said.
The Buy Now Pay Later industry has been a beneficiary of pandemic-fueled online shopping — and could grow as much as 15 times its current size, the Times reported, according to some estimates.