Square is all set to buy Australian BNPL darling Afterpay for $29 Bn in stock. The transaction is predicted to complete by the end of the first quarter of 2022. Upon completion, Square will then appoint one of Afterpay’s directors to join its board.
The price is set based on the closing price of Square’s common stocks on the 30th of July that was $247.36.
This is another major deal Square has been involved in this year. It announced that it had purchased a majority stake in Tidal’s streaming service earlier this year.
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Buy Now Pay Later Services Garner Consumer Interest
BNPL services offered by companies such as Affirm, Klarna, and Afterpay are becoming quite popular across the world. Due to this, a lot of companies have shown great interest in the BNPL space.
Apart from Square, reports are suggesting that even Apple is currently working toward developing a similar service. The service is called “Apple Pay Later”.
According to Oliver Yu, Analyst at CB Insights, the e-commerce part of BNPL was well-equipped to deal with the pandemic. He said that in-store shopping capacity took a major hit due to the lockdowns, so BNPL came as a blessing for merchants.
Merchants from around the world could use BNPL services to make sales. Even retailers such as Macy’s, Peloton, and Sephora turned to buy now pay later services to boost demand.
Afterpay has an impressive customer base of around 16 million users and around 100,000 merchants around the globe.
Challenges for Afterpay
Despite its impressive growth, the road ahead is not easy for Afterpay. One of the main reasons for this is the increasing number of BNPL products in the market.
Today, a lot of companies are focusing on the development of BNPL products, which has increased competition in the market.
For example, PayPal created a BNPL product called “Pay in 4”. Besides, Klarna, another popular payment company, has backing from China’s Alibaba Group.
Chinese companies such as Tencent and Baidu have also included BNPL features in their e-commerce products. Even credit card companies and banks have started finding solutions to wave off the threat from BNPL to their revenue streams.
Another barrier is regulatory. Since BNPL does not comply with the traditional definition of consumer debt, there is still ambiguity around it.
Will Square continue its acquisition spree? Will this move change the BNPL landscape?
Leave your comments below and tell us what you think!
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Image Source: Square