Square plans to buy Australian fintech company Afterpay as it looks to further expand in the burgeoning installment loan market.
Jack Dorsey’s payments company announced the $ 29 billion stock deal on Sunday night. The price tag marks a premium of approximately 30% over Afterpay’s last closing price.
“Square and Afterpay have a shared purpose,” said Dorsey, Square’s CEO, in a statement. “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.”
Afterpay shares in Australia soared more than 23% on Monday morning on the news.
Square pointed to consumers avoiding traditional credit, especially younger shoppers. The San Francisco-based payments company already offers installment loans, which it said has been a “powerful growth tool” for Square’s core merchant business. He plans to integrate Afterpay into both his merchant and the Cash App ecosystems.
Afterpay allows customers to pay in four interest-free installments and pay a fee if they don’t make an automatic payment. Its 16 million customers will eventually be able to manage 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 expensive purchases, such as furniture. Online payment players and fintechs have been racing to launch their own version of “pay later” products for cheap online items.
Affirm is one of the best-known public companies that offers the option of financing items in smaller monthly payments. PayPal, Klarna, Mastercard and Fiserv, American Express, Citi, and JP Morgan Chase offer similar loan products. Apple plans to launch installment loans in partnership with Goldman Sachs, Bloomberg reported last month.
Square also announced its second-quarter results on Sunday, ahead of the previously planned launch on Wednesday.
Gross profit increased 91% over the prior year, marking a record quarterly growth rate for the payments company. App cash earnings increased 94%, while seller increased 85% over the prior year. Net income, excluding bitcoin, amounted to $ 1.96 billion for the quarter, an 87% year-over-year increase.
The company’s Venmo competitor, Cash App, now has 40 million active customers who transact monthly.
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