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The $39 billion sale of the Australian buy now, pay later giant Afterpay to US payments technology provider Block has cleared – providing more finance opportunities for Australian SMEs.
Block, Inc (previously known as Square) has now acquired all the shares of the ASX-listed “buy now, pay later” (BNPL) Afterpay platform, following the completion of the scheme of arrangement announced last year – marking one of the largest acquisition deals in Australian history.
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Block said the move will accelerate its strategic priorities for its existing Square and Cash App ecosystems and “will enable Square sellers to offer Afterpay’s BNPL experience to their customers, helping them attract new shoppers and drive incremental revenue”.
Jack Dorsey, Block co-founder and chief executive said the acquisition will help deliver “even better” products and services for sellers and consumers.
It comes at the same time as Square launches its first integration with Afterpay providing “Buy Now, Pay Later” (BNPL) functionality to drive more sales to the users of its software in the US and Australia (its largest market outside the US).
Square, which supplies small, white payment dongles for small businesses to accept card payments, is now the business software and banking unit of Block and offers direct lending to merchants for capital spending in the US and in Australia.
And now with Afterpay, it also can fund customers’ short-term instalment loans inside the retailing experience.
Set to bring more opportunities for Australian SMEs
Head of Square Alyssa Henry said the merger will “help bring more businesses of all sizes into the Square ecosystem”.
“This is truly just the beginning of what we’ll be able to offer sellers, and their buyers, through this acquisition,” Ms Henry said.
“Our mission is to help sellers never miss a sale, operate more efficiently, better manage cash flow, and improve growth, retention, and acquisition of buyers. Afterpay helps us further this mission.”
As part of Square’s services, it offers select customers working capital using loans made for a fixed fee, not an annual interest rate.
Equilibria Finance managing director Anthony Landahl said while the SME loans will attract some small-business owners it won’t take away from the “value of the broker”.
“As I understand, Square will be offering loans up to about $75,000 without security and essentially, without tying up any of the business owners assets, bank guarantees and going through a lot of those cumbersome processes,” Mr Landahl said.
“So I think for a particular type of small business, who uses those types of [Afterpay] services, it could be a very quick way to access working capital.”
But Mr Landahl said “there’s always a risk with an unsecured loan” particularly if businesses haven’t looked at the return on the investment.
“So if you’re purely looking at it as ‘you’re chasing your tail with cash flow as a small business’, and you’re not doing the analysis on what’s the return on the investment…That to me is where the broker steps in,” Mr Landahl said.
“The broker role is adding value beyond just the actual product and that’s the difference.
“Because when we’re dealing with our small business clients, whether it’s an unsecured facility with the current lenders, whether it’s going through the bank, we’re doing that type of analysis for our businesses.”
Regardless, Mr Landahl said it will bring “some innovation to the market”.
BNPL has accelerated following the success of Afterpay, with multiple lenders jumping into the landscape with their own offerings, including Suncorp, CBA and Citi.
Heads of Afterpay and Block merge
As part of the acquisition former Afterpay director Sharon Rothstein will serve as a member of Block’s board of directors.
“I’ve long admired Block’s purpose to make the financial system more accessible and inclusive. I’m honored and excited to bring my global experiences to the diverse expertise of this Board,” said Ms Rothstein.
Afterpay co-founders and co-CEOs Nick Molnar and Anthony Eisen have also joined Block and will help lead Afterpay’s respective seller and consumer businesses, as part of Block’s Square and Cash App ecosystems.
Block will release financial results for the fourth quarter and full-year 2021 on 24 February 2022, after the market closes.
[Related: Afterpay sale clears regulatory approvals]
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