Last Updated: January 18, 2022
Square, a financial services and digital payment solutions giant, is acquiring Afterpay, Yahoo Finance reports. Square’s acquisition of Afterpay will strengthen its growing network of consumers across the globe. It also shows that there’s an exciting future for the buy now, pay later market that Square intends to be a part of.
The buy now, pay later system offers an enticing option for people buying products online. This industry is growing fast, applied both in ecommerce and at physical stores, due to its easy and accessible way of payment.
Afterpay, a company that has led the way and convinced many consumers to move away from credit cards to debit transactions, allows users to pay off their loan in a set number of payments, usually four, with no interest rate.
The pandemic seems to have accelerated the acceptance of the BNPL system. During the lockdown, ecommerce businesses flourished, and with them the BNPL system. Buy now, pay later proved popular with consumers, since many plans charge no interest. Siemiatkowski, CEO of another BNPL company, Klarna, said, “It’s very exciting to see this shift away from credit cards to debit cards and buy now pay later.” BNPL is mostly used by the young population who are wary of credit cards and the banking system in general.
Are Debit Cards the Payment Method of the Future?
In 2020 there was a shift from credit cards to debit cards. When comparing the period of October 1 to November 30, 2020 to this exact time period in 2019, Visa noted a decrease in the usage of credit cards by 4%, while there was a significant increase of 21% in the usage of debit cards. From Visa to Mastercard, the new payment method seems likely to slowly replace credit cards.
Klarna, Square’s competitor, has been growing quickly with the current estimate of 20 million users. Aside from Klarna, the US-based company Affirm is another competitor that Square should keep an eye on.
“People are dead tired of the banking industry and all their hidden fees and all their dirty tricks,” Siemiatkowski said. “And this is a better way of offering these services to consumers. So I think this is the beginning of a very major, major shift in this space.”