US payments company Square – run by Twitter CEO Jack Dorsey – is acquiring Afterpay in a deal worth $39 billion.
The companies made the announcement to the Australian Stock Exchange (ASX) before trading on Monday, saying Square will acquire “all of the issued shares in Afterpay” based on last week’s closing price.
Co-founders and co-CEOs of Afterpay, Anthony Eisen and Nick Molnar, said the massive acquisition helps put Australian technology on the map.
“The transaction marks an important recognition of the Australian technology sector as homegrown innovation continues to be shared more broadly throughout the world,” they said in a joint statement.
Both Square and Afterpay have ‘fully aligned purposes”, according to Eisen and Molnar, with Square wanting to integrate the Australian firm’s buy-now pay-later (BNPL) model into Square’s financial products, like its point of sale system which is commonly used by small merchants.
Jack Dorsey, CEO and co-founder of Square, agreed the two companies have “a shared purpose” which is “to make the financial system more fair, accessible, and inclusive”.
“Afterpay has built a trusted brand aligned with those principles,” he said in a statement.
“Together, we can better connect our Cash App and Seller ecosystems to deliver even more compelling products and services for merchants and consumers.”
Square posted US$1.14 billion gross profit in its latest quarterly results, closely split between those two ecosystems which offer a suite of digital banking services – transactions, transfers, savings, and investments – for both merchants and consumers.
Today, we announced our plans to acquire @afterpay_au to advance our shared mission of economic empowerment. Together, we’re aiming to build financial products that are inclusive for all.— Square (@Square) August 1, 2021
Press release: https://t.co/QRwgNPPAv3
Legal notices: https://t.co/hADBjogLyb pic.twitter.com/AUqky9mGKM
The company already offers loans to small businesses but will now look to offer credit to Cash App users through Afterpay’s popular BNPL mechanisms.
It also offers investment in equities and cryptocurrency like bitcoin which Square invested $70 million into late last year.
Afterpay’s BNPL innovation has sparked a rush on the adapted form of credit that sees customers pay for purchases through a series of interest-free payments with the likes of Commonwealth Bank and PayPal both preparing similar offerings for their customers.
Although it penalises customers who don’t make payments on time, less than 10 per cent of Afterpay’s income came from late fees, according to its 2020-2021 half-yearly report.
Most of Afterpay’s income – an estimated $822 million out of $925 million earned in the 2020-21 financial year – comes from fees nearly 100,000 small businesses pay to have access to Afterpay’s roughly 16 million customers.
BNPL operators have so far managed to avoid tighter regulatory control in Australia by adopting a voluntary code of practice that includes commitments such as “we will focus on customers” and “we will be fair, honest and ethical in all our dealings”.