Square has agreed to buy Australia-based consumer lending startup Afterpay in a $29 billion all-stock deal as competition heats up in the emerging “buy now, pay later” market that encroaches on the market of credit card networks such as Visa (V). The digital payments leader also reported mixed second-quarter results.
SQ stock enters the new week just below a buy point.
The big move by Square (SQ) comes amid increasing competition with PayPal Holdings (PYPL), Visa (V) and others. Merchants offer BNPL financing to consumers primarily during checkout when they shop online.
Also, the Afterpay acquisition comes amid Square’s move into Bitcoin and cryptocurrencies.
Under buy now, pay later plans, consumers generally split payments into three or four equal installments interest-free, and avoid transaction fees if they pay on time.
For most buy-now-pay-later transactions, consumers now use debit cards that deduct money from a checking account, analysts say. Merchants, though, pay BNPL companies a fixed fee as well as a small commission.
Square said it plans to integrate Afterpay into its Cash App consumer business.
Competition has been heating up in the buy-now pay later market. Visa is quietly rolling out pilot buy-now-pay-later services, also known as BNPL, in the U.S., Canada, Russia and Malaysia.
Square earnings per share spiked 266% to 66 cents. Revenue surged 266% to $4.68 billion. Analysts expected Square earnings per share of 30 cents on sales of $5.03 billion. The company had been scheduled to report Q2 results on Thursday.
SQ stock fell 6.3% last week to 247.26, back below a handle buy point of 254.88. SQ stock has an Accumulation/Distribution Rating of B-minus.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.