Jack Dorsey’s payment firm announced the deal for $ 29 billion in shares on Sunday evening. The price tag marks a premium of around 30% over Afterpay’s last closing price.
“Square and Afterpay have a common goal,” Square CEO Dorsey said in a statement. “We built our business to make the financial system more fair, accessible and inclusive, and Afterpay has built a brand of trust aligned with these principles. “
Shares of Afterpay in Australia climbed more than 23% on Monday morning in the wake of the news.
Square pointed out that consumers are avoiding traditional credit, especially younger buyers. The San Francisco-based payments company already offers installment loans, which said it was a “powerful growth tool” for Square’s core sales business. It plans to integrate Afterpay into its seller and Cash App ecosystems.
Afterpay allows customers to pay in four interest-free installments and pay a fee if they miss an automated payment. Its 16 million customers will eventually be able to manage installment payments directly via Cash App. The deal is expected to be finalized in the first quarter of 2022.
So-called installment loans have been around for decades and were historically used for large purchases such as furniture. Online payment players and fintechs have been competing to launch their own version of “pay later” products for items online for a few hundred dollars.
Affirm is one of the more well-known public companies offering the opportunity to fund items in smaller monthly payments. PayPal, Klarna, Mastercard and Fiserv, American Express, Citi, and JP Morgan Chase all offer similar loan products. Apple plans to launch installment loans as part of a partnership with Goldman Sachs, Bloomberg reported last month.
Square also announced its second quarter results on Sunday, ahead of the previously scheduled release on Wednesday.
Gross profit increased 91% from a year ago, marking a record quarterly growth rate for the payment company. Cash App’s profit rose 94%, while the seller jumped 85% from a year ago. Net revenue excluding bitcoin was $ 1.96 billion for the quarter, an increase of 87% year-over-year.
The company’s competitor Venmo, Cash App, now has 40 million active customers who conduct monthly transactions.
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