Buy-now-pay-later services are very hot in the pandemic era and Square wants in. The digital payments company, founded by Twitter CEO Jack Dorsey, has acquired Australian BNPL company Afterpay for $29 million, it was announced on Sunday.
Afterpay allows you to buy a product online or in-store and pay for it in four installments. One quarter is paid upfront, with subsequent quarters being paid every two weeks. The service comes with zero interest, as Afterpay makes money from retailers that pay to appear on the service, though there are late fees for missed payments.
Afterpay is one of many buy-now-pay-later companies that have flourished since the COVID-19 pandemic accelerated the trend towards online shopping, along with the likes of Klarna and Affirm. PayPal jumped on the bandwagon last September with its Pay in 4 feature. CB Insights, a research firm, expects the sector to grow between 10- and 15-times by 2025.
"Square and Afterpay have a shared purpose," 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 aligned with those principles."
"Together, we can better connect our Cash App and Seller ecosystems to deliver even more compelling products and services for merchants and consumers, putting the power back in their hands."
Square last made headlines in July when it announced it would create a new business focused on Bitcoin, in which it's a heavy investor. The new business will help developers design decentralized financial products. Or, in Dorsey's words, "an open developer platform with the sole goal of making it easy to create non-custodial, permissionless, and decentralized financial services."
Square's purchase will allow it greater exposure to Australia, the company's second biggest market. Afterpay has 16 million users worldwide, with over 100,000 merchants signed up to its service.
The deal is expected to close in early 2022, Square said, and will see one of Afterpay's executives will be appointed to Square's board.