Should I Watch Square Following Its Afterpay Acquisition?

As if releasing its earnings report on a Sunday night, three days earlier than expected, couldn’t cause analysts like myself enough headaches, Square (NYSE: SQ) threw in an acquisition to boot. 

This article was originally written by MyWallSt. Read more insights from the MyWallSt team here.

But what an acquisition it could be…

Who is Square buying?

Afterpay. 

A pretty big deal in Australia and abroad, Afterpay is a major player in the ‘buy now, pay later’ (BNPL) space; a way of spreading out your payments when you buy something, like an installment plan, but without interest.

As of June 30, it served more than 16 million customers and nearly 100,000 merchants globally, including major retailers across several industries.

Now, in an all-stock deal worth approximately $29 billion, Square is adding this BNPL giant to its already significant arsenal, combining to create a payments solutions space like no other.  

The BNPL space has exploded in popularity over the past two years, especially among younger consumers, whom companies are hoping to turn into lifelong customers as traditional credit cards and interest rates continue to appeal less and less to the wider market. This has led to a rise in BNPL firms such as Klarna in Europe, Affirm, and Afterpay. 

By combining forces, Square can integrate Afterpay with its hugely popular Cash App — 40 million monthly transacting customers — and allow consumers to combine the two services in one seamless transaction, encouraging further brand loyalty through sheer ease-of-use and value offering. 

Of course, as mentioned above, competition in the space is heating up, and even Apple has thrown a little spice into the ring of late with its own BNPL plans made known. So, it will be interesting to watch this industry going forward and how Square manages its latest acquisition, and whether it can pull ahead of the pack.