Dropping a deal that size, late on Sunday night should be illegal, but perhaps the negotiations stretched too close and Square wanted to bed the bride before minds got changed!
AfterPay basically offers consumers micro-loans at checkouts during ecommerce transactions. Taking out your credit card, entering info, running up on limits, is believed to be an arduous process, unworthy of the convenience-first demands of 2021.
BNPL platforms rely solely on secondary data, your transaction history, and other derived info to determine your ability to pay. $100 billion+ was processed via BNPL in 2020, nearly 2% of ALL global ecommerce volume, expected to 3x over the next 3 years!
Square’s business — Square basically sells these sleek terminals for your neighborhood shopkeeper to process payments — via cards, digital wallets, QR codes, the entire suite. Then there’s P2P payments platform Cash App too (like a much cooler PayTM), which also allows users to buy Bitcoin.
So what’s the grand logic:
- Firstly, Square now gets to serve an international base of users with this acquisition, instantly. Lack of geographic diversity was considered a huge risk.
- AfterPay can work into Cash App to disburse consumer loans over time, or split purchases made using mobile wallet
- AfterPay can also be integrated for offline store purchases — offer it as a perk for merchants. Buy a big sofa? Pick it now, pay later!
What matters — strategically it's a good deal. Don’t forget Apple is working with a BNPL product with Goldman Sachs too. But investors are pissed that Square paid up via stock, which is generally considered an expensive way to pay for things.
Big picture — the $700B+ global credit card industry probably had a sleepless Sunday. Digital wallets and buy-now-pay-later are a dangerous combo, capable of uprooting the traditional card industry.
okay, that was long… phew!