Source -AfterPay Press Kit

As ‘buy now, pay later’ (BNPL) trend takes wing, the payment firm of Jack Dorsey, Square Inc announced on 1st August that they will purchase Australian fintech company Afterpay Limited for $29 billion, expanding further into the flourishing instalment loan market.

After announcing the all-stock deal, the shares of BNPL pioneer Afterpay’s heaved and closed nearly 19% higher on the very next day. The companies said in a joint account that the all-stock deal would value the shares at a cost of $92.65.

Square Inc. CEO Jack Dorsey said in a statement, “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.” The takeover highlights the popularity of a business model that has overturned consumer credit by charging traders a fee to offer small point of sale loans which their shoppers pay back in instalments without interest, avoiding credit checks.

The San Francisco based company points out to consumers avoiding traditional credits, especially young buyers, for installment loans. Though the company already offers installment loans which is a ‘powerful growth tool’ for its core seller business.

In case of Afterpay,it  allows its customers to pay in four interest free instalments and pay a fee if they slip a manual payment. For this buy out 16 million customers will be able to manage installment payments directly from their phones. However, the deal is estimated to close within the first few months of 2022.

Instalment loans have been used over the decades by Payment players and fintech firms like PayPal and Mastercard have been hastening to unveiling their own version of ‘buy now, pay later’ products in the minimum hundreds of dollars. At the same time Apple is also preparing to launch their installment lending in an alliance with Goldman Sachs.

Joyashree Dey

CBW - External Analyst

INDIA