The payments app Square said on Sunday that it planned to acquire the Australian “buy now, pay later” company Afterpay in a deal that values Afterpay at about $29 billion.
The deal introduces Afterpay’s service, which allows users to stagger the cost of their purchases over interest-free installments, to U.S. consumers and the millions of small businesses that process their credit card transactions on the Square app. It will also help the San Francisco-based Square further expand in Australia, its second-biggest market after the United States.
Square’s Cash App, a payment platform with more than 70 million customers, has been a key point of growth for the company, particularly during the pandemic as customers have sought out cash-free options.
Afterpay works with more than 16 million consumers and nearly 100,000 merchants globally. As part of the deal, its founders, Anthony Eisen and Nick Molnar, will join Square. Square will also appoint one Afterpay director to its board once the deal closes.
Both companies have positioned themselves as rivals to the traditional banking stalwarts.
“There’s a lot of growth occurring in this shift away from credit to debit, and it’s due to the fact that we’ve flipped the model on its head,” Mr. Molnar said in an interview. The banks’ credit model “doesn’t work,” he said. “The incentive is the opposite of how we built our product, which is to charge the retailer a small fee instead of making our money from the consumer.”
In a statement, Square’s chief executive, Jack Dorsey, said, “Square and Afterpay have a shared purpose,” adding, “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.”
The deal still needs shareholder and regulatory approval. The Justice Department has scrutinized deals in the financial technology industry recently, suing to block Visa’s planned $5.3 billion deal to acquire the upstart firm Plaid. The two ultimately called off the transaction.
When asked about potential antitrust concerns, Square’s chief financial officer, Amrita Ahuja, said that the “buy now, pay later” industry is still “highly competitive,” with plenty of room for growth. “Square and Afterpay are two very complementary businesses, ones in which, when you bring them together, can create a broader product offering for consumers and merchants and more choice,” she said.
