While the Afterpay Ltd (ASX: APT) share price has fallen 5% in the past 5 days, its likely acquirer has been touting the magnitude of its potential.
As the US payment giant Square Inc (NYSE: SQ) moves closer to gobbling up Australia's largest buy now, pay later (BNPL) provider, Square CEO Jack Dorsey has shared what the implementation could mean for the company.
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Match made in heaven?
On Thursday last week, in an ASX announcement, Afterpay revealed a step forward in the company's move to be acquired by Square. The release stated that Square shareholders had approved the issuing of Square Class A common stock to Afterpay shareholders — marking a major milestone in the deal process.
Since then, shares in Afterpay have been dragged lower in tandem with the value of Square. This followed the release of the US company's third-quarter results the very next day. Unfortunately for shareholders, its revenue had missed analyst expectations.
However, the same day, Dorsey spoke on the impact the ASX-listed Afterpay could have on Square once the two companies are integrated. Namely, the additional edge gained from having access to both sellers and customers.
Here's some of what Dorsey said:
We do believe that having both systems is our ultimate superpower and differentiator – having both ends of the counter, two different audiences, of sellers and individuals is really important.
It is the secret behind Afterpay as well, and probably represents our largest potential.
These comments come at a time when competition in the payments space is possibly fiercer than ever. For example, Paypal Holdings Inc (NASDAQ: PYPL) is not giving up the payments market share without a fight. Today, the US$270 billion company announced a partnership with Amazon.com Inc (NASDAQ: AMZN) to integrate Venmo at the checkout.
Meanwhile, on Aussie shores, the Commonwealth Bank of Australia (ASX: CBA) is upping its efforts in BNPL through its StepPay product. Australia's largest bank announced it would pay merchants (rather than charge them) a 4% commission for sales using StepPay during the Christmas period.
Money by Afterpay, another ASX bank attack vector?
As the grey area between payment/tech giants and traditional banks widens, Aussie banks have begun seeing Square as a competitor. In Afterpay's case, it is reportedly working on adding mortgages and other loans by partnering with Westpac Banking Corp (ASX: WBC).
While some banks are going on the offence as Afterpay expands its Money by Afterpay product, others are partnering with it.
Nonetheless, Afterpay's expansion into more financial products could offer Square a way of grabbing market share in personal finance.
