back to article Jack Dorsey's side hustle – payments outfit Square – acquires buy now pay later darling Afterpay for $29bn

Square, the credit card processing company run by Twitter founder Jack Dorsey, has announced plans to acquire Australian buy-now-pay-later (BNPL) outfit Afterpay for $29 billion. Afterpay offers shoppers the chance to acquire goods and services with four fortnightly payments. Merchants pay a commission for each Afterpay sale, …

  1. HatHatHatHatHat

    Ka-ching!

  2. Chris G Silver badge

    Another 'Mister ten percenter' !

    This just makes life harder for businesses because they are footing the bill and have to either absorb the cost to stay competetive or raise prices to pay for it. The only real beneficiary is the hustler in the middle.

    Things like this are not good for smaller businesses, particularly when the likes of Amazon have already driven margins down

    1. AMBxx Silver badge
      Boffin

      Nobody's being force to offer BNPL. All it really does is move the cost of credit from consumer to seller without the seller taking on the risk. If your margins are high, it's worth offering.

      Personally, I think all this is going to be brought into the remit of consumer credit and soon grind to a halt due to stricter legislation.

      1. NeilPost Silver badge

        Watch out for Tesco Bank Fucking you over as they view Credit Card payments to Klarna and the like as ‘Cash Transactions’ and they will stiff you fees and interest.

        Complain and get a refund and change the instalment payment method.

        Halifax do this too (funnily not same group Lloyd’s or BoS).

    2. tip pc Silver badge

      “ This just makes life harder for businesses because they are footing the bill and have to either absorb the cost to stay competetive or raise prices to pay for it. The only real beneficiary is the hustler in the middle.”

      Looks like afterpay are just taking the commission that would have gone to a credit card company.

      Business don’t have to offer afterpay, but will likely make more sales if they accept it.

      More sales at less profit per sale is better than less sales at more profit, it’s why retailers have sales, it clears stock and returns money to them to invest in new stock.

      1. Anonymous Coward
        Anonymous Coward

        of course, more work for less money is everyone's objective, not! Let me think, sell one thing for £1M profit or one million things for £1 profit each....

      2. Charlie Clark Silver badge
        Stop

        More sales at less profit per sale is better than less sales at more profit

        Let's take this statement to its logical conclusion… nothing beats selling at a loss. As practised frequently by supermarkets (though the suppliers are forced to foot the bill) and in their time British Leyland and Sinclair Computers!

        Businesses often don't have much choice as the option is covered by the T&Cs and the option is offered, often aggressively, to customers by payment providers, because it increases their margin.

        1. tip pc Silver badge

          There is a whole discipline concerned with getting pricing right. You want an elasticity of 1 which means your maximising your profits, but dropping the price ups the quantity sold.

          If you’ve got stock and your vendor is about to release a new shiny shiny at the same price as the old what do you do? Sell both at the same price? Drop the price of the old do you shift your stock and have cash to buy stock of the new?

          Keep the old until the new and ship back the old hoping to get good availability of the new when you know the vendor will favour resellers with a better track record of shifting stock?

          https://en.m.wikipedia.org/wiki/Law_of_demand

          https://en.m.wikipedia.org/wiki/Price_elasticity_of_demand

    3. Ol'Peculier

      Certainly with ClearPay if a customer renegades on their repayments, ClearPay takes the hit, not the retailer. Yes, it all adds up to higher fees but at least it's something not to be concerned about if you're flogging stuff.

      (I don't work for them, but am working on adding it to our sites)

  3. Anonymous Coward
    Anonymous Coward

    Remember Lay by?

    You put something aside in a store and then paid it off.

    No credit charge other than maybe setting up an account.

    Once paid, you picked it up.

    Everything old is new again.

    1. tip pc Silver badge

      Re: Remember Lay by?

      With afterpay you can get it now.

      More like radio rentals or rumbalows.

      1. Anonymous Coward
        Anonymous Coward

        Re: Remember Lay by?

        I'm sure the mail-order catalogue shops of yore used to do this (Freemans, John Noble etc)

      2. Fruit and Nutcase Silver badge
        Thumb Down

        Re: Remember Lay by?

        I thought we'd seen the back of the likes of Wonga, Crazy George's/Brighthouse and the plethora of other parasitic businesses who target the people who are the people least suited to avail themselves to the financial equivalent of quicksand.

        1. Charlie Clark Silver badge

          Re: Remember Lay by?

          We'll never see the back of loan sharks but this is really standard practice by payment provides including credit cards. And, of course, in the end it leads to higher prices as sellers hedge against it. Some shops will then offer discounts if you avoid it.

          1. Michael Wojcik Silver badge

            Re: Remember Lay by?

            Alternatively, some vendors will offer discounts if you buy on credit, as long as you go through one of their partners, who will give them a kickback. Banks are eager to sign up new revolving-credit customers whom they can milk for years afterward.

            1. Charlie Clark Silver badge

              Re: Remember Lay by?

              As long as kickbacks are involved, the customer is overpaying. Preferred payment provider deals are supposed to drive more, higher value sales: ie. you will be bombarded with cross- and upselling ideas "based on your purchase history". Fortunately, most of my suppliers are happy to offer me good deals for continued custom without some parasitic payment provider.

  4. Howard Sway Silver badge

    make the financial system more fair, accessible, and inclusive

    Seem to remember a little thing called "sub-prime mortgages" that was sold with exactly the same idea. Remind me how that episode of consumers taking on mountains of debt they couldn't afford to service due to stupidly easy credit availability went............

    What's not clear is who takes on the liability for non payment with this system. Presumably the vendor must still sue the customer if debts aren't repaid. It surely can't be Afterpay that has to settle up : that would be far too risky.

    1. sketharaman

      Re: make the financial system more fair, accessible, and inclusive

      Banks charge 2-3% MDR and take over the risk of default in payment by credit cardholder ("credit risk"). I can bet that BNPL providers, who charge 4-6% MDR, will also take over the credit risk from the vendor / merchant. Yes, it's too risky but BNPLs are getting a higher slice of the sale to cover their risk. End of the day, NO RISC NO GAIN, as it said on an HP RISC processor T-Shirt back in the day!

  5. Charlie Clark Silver badge
    Stop

    P/E > 25

    Deals of this kind show how fucked the capital markets are! The deal is being financed by creating shares, ie. debt, worth $ 29 billion and no regulator is involved. Existing shareholders in Sqaure don't get a say in their equity being diluted, but the existing investors in Afterpay can cash out quickly and easily, and all to pay for a company than hasn't turned $ 1 billion profit.

    These short terms, get rich deals, are screwing any kind of long term financial stability.

  6. Cuddles Silver badge

    TANSTAAFL

    "Merchants pay a commission for each Afterpay sale, often at higher rates than those charged by credit card companies. But consumers can use Afterpay free of charge if they pay on time. Even if punters miss a payment, the initial $10 late fee can be less than credit card interest on the same purchase."

    They're a moneylender. That's a very mature market with plenty of competition. If they plan on making any profit, they'll be charging exactly the same as everyone else in the business. Sure, the late fee "can" be less than interest payments from other moneylenders, but on average, it absolutely will not be. So what we actually have is a payment service which charges merchants a commission, while allowing consumers to use it free of charge as long as they pay within a certain time, after which they start raking in the late fees. Call it a credit card, call it a loan, call it a disruptive digital startup; they're all exactly the same in every way except marketing.

  7. Bitsminer Bronze badge

    Buy-Now Pay Later!

    Thank-you for your order. Would you like to select Buy-Now Pay Later terms? At no cost to you!

    Please click SELECT HERE if you would like to Buy Now Pay Later or n to pay now.

    Are you sure you don't want to Buy Now Pay Later? Please click OK or Default to select Buy Now Pay Later!

    Please click SELECT HERE if you would like to Buy Now Pay Later or n to pay now.

    Are you sure you don't want to Buy-Now Pay Later? Please click OK or Default to select Buy Now Pay Later!

    Please click SELECT HERE if you would like to Buy Now Pay Later or n to pay now.

    Are you sure you don't want to Buy-Now Pay Later? Please click OK or Default to select Buy Now Pay Later!

    Kudos to Amazon for the idea.

    /s

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