Square spends $29 billion to acquire Australian company Afterpay to tap into younger users

Square Inc., the digital payments platform led by Twitter founder Jack Dorsey, agreed to buy Australian company Afterpay Ltd. for $29 billion, its largest acquisition ever.

Afterpay was founded in 2015 and currently has more than 1,300 employees worldwide. The company provides customers with a more flexible payment method. Instead of paying the full amount of the purchased goods, consumers can pay in installments every two weeks within a maximum period of 56 days, without charging any interest or handling fees.

The companies said in a statement that the deal values ​​Afterpay shares at $126.21 per share, 31 per cent higher than Friday's close of $96.66. Still, it is below Afterpay's previous high of $158.47 in February.

Square said the buy now, pay later concept represents an opportunity to capitalize on a shift away from traditional credit, particularly among younger consumers. Square’s plan is to integrate Afterpay into its consumer Cash App and seller products for small businesses, Chief Financial Officer Amrita Ahuja said in an interview.

“This is very different to the traditional consumer financing business model,” said Ahuja, describing Buy Now Pay Later as an “alternative” to traditional credit. “Since our inception, we have always viewed fast access to funds as a key priority for our customers, both merchants and consumers,” she added.

Afterpay lets consumers buy goods on credit and pay for them in instalments. It is particularly popular with younger consumers who may not have credit cards. As long as people pay on time, there are no fees or interest, according to Afterpay's website.

Ahuja said the deal should also help boost Cash App’s total user base, adding Afterpay’s 16 million users to Cash App’s existing base of 70 million annual users.

Under the proposed deal, Afterpay co-founders and co-CEOs Anthony Eisen and Nick Molnar will join Square as part of Square’s Seller and Cash App divisions to help lead Afterpay’s merchant and consumer businesses.

Square recently launched banking services, including checking and savings accounts for small businesses and providing loans. The addition of Afterpay also gives the digital payments company a chance to expand into consumer lending, something it currently does not offer.

“Square and Afterpay share common goals. We built our business to make the financial system more fair, accessible, and inclusive, and Afterpay has built a trusted brand that aligns with those principles,” Dorsey said in the statement.

The board of Melbourne-based Afterpay unanimously recommended shareholders accept the deal, which the company said was expected to close in the first quarter of 2022.