CNBC Television published this video item, entitled “Klarna CEO on Square-Afterpay deal: Surprised to see consolidation so early” – below is their description.
Klarna CEO and co-founder Sebastian Siemiatkowski joins ‘Tech Check’ to discuss the Square-Afterpay acquisition, what it will take for these companies to be profitable, Apple’s move into the ‘buy now, pay later’ space and more. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi
Square plans to buy Australian fintech company Afterpay as it looks to expand further into the booming installment loan market.
Jack Dorsey’s payments company announced the $29 billion, all-stock deal on Sunday evening. The price tag marks a roughly 30% premium to Afterpay’s last closing price.
“Square and Afterpay have a shared purpose,” said Square’s CEO Dorsey in a statement. “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.”
Shares of Afterpay in Australia surged on that news, and closed nearly 19% higher on Monday.
Square pointed to consumers eschewing traditional credit, especially younger buyers. The San Francisco-based payments company already offers installment loans, which said it has been a “powerful growth tool” for Square’s core seller business. It plans to integrate Afterpay into both its seller and Cash App ecosystems.
In an interview with CNBC’s “Squawk on the Street” Monday, Square CFO Amrita Ahuja said the company sees the acquisition as an opportunity to create a “more powerful ecommerce platform” that appeases growing consumer interest in “transparent buying opportunities” and offers new ways for merchants to serve their customers.
“We see a real opportunity to enable the next gen consumer that’s looking for different ways and, in this experience, an interest free way of expanding the purchase potential,” Ahuja said. “What that ends up doing is merchants pay for the Afterpay experience but they get higher average order volumes, they get greater conversion, they get greater frequency and lower returns and they get a marketing channel from Afterpay… which is ultimately helping those merchants grow there business and that’s what Square is all about.”
Afterpay lets customers pay in four interest-free installments and pay a fee if they miss an automated payment. Its 16 million customers will eventually be able to manage installment payments directly through Cash App. The deal is expected to close in the first quarter of 2022.
So-called installment loans have been around for decades, and were historically used for big-ticket purchases such as furniture. Online payment players and fintechs have been competing to launch their own version of “pay later” products for online items in the low hundreds of dollars.
Affirm is one of the better-known public companies offering the option to finance items in smaller, monthly payments. PayPal, Klarna, Mastercard and Fiserv, American Express, Citi and J.P. Morgan Chase are all offering similar loan products. Apple is planning to launch installment lending in a partnership with Goldman Sachs, Bloomberg reported last month.
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