Square to buy fintech in Australia after push amid ‘buy now, pay later’ trend

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Jack Dorsey, CEO of Twitter and the co-founder and CEO of Square, speaks during the Bitcoin 2021 Convention at the Mana Convention Center in Miami, Florida, on June 4, 2021.

Marco Bello | AFP | Getty Images

Square plans to buy Australian fintech company Afterpay as it looks to expand further into the booming installment loan market.

Payments firm Jack Dorsey announced a $29 billion all-stock deal Sunday night. The price represents a premium of approximately 30% over Afterpay’s last closing price.

“Square and Afterpay have a common purpose,” Square CEO Dorsey said in a statement. “We built our business to make the financial system more fair, accessible and inclusive, and Afterpay has built a trusted brand that aligns with these principles.”

Afterpay share prices in Australia rose more than 23% Monday morning on the news.

Squire noted that consumers are avoiding traditional credit, especially younger buyers. The San Francisco-based payments company already offers installment loans, which it said has been a “robust growth tool” for Square’s core sellers business. It plans to integrate Afterpay into both vendor systems and cash applications.

Afterpay allows customers to pay in four installments without interest and pay a fee if they miss the automatic payment. Its 16 million customers will eventually be able to manage their installment payments directly through the Cash App. The deal is expected to close in the first quarter of 2022.

So-called installment loans have been around for decades, and were historically used for large purchases such as furniture. Online payment players and fintech companies are competing to launch their own version of “Pay Later” products for online items at low hundreds of dollars.

Affirm is a well-known public company that offers the option of financing items with smaller monthly payments. PayPal, Klarna, Mastercard, Fiserv, American Express, Citi, and JP Morgan Chase offer similar loan products. Bloomberg reported last month that Apple plans to launch installment lending in partnership with Goldman Sachs.

Square also announced its second-quarter results on Sunday, ahead of a previously planned release on Wednesday.

Gross profit is up 91% from a year ago, which is a record quarterly growth rate for the payments company. Cash app earnings are up 94%, while Seller is up 85% from last year. Net revenue excluding bitcoin was $1.96 billion for the quarter, up 87% year over year.

The Cash App, the company’s Venmo competitor, now has 40 million active customers transacting monthly.

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