In Australia millennials, are allergic to credit cards. Credit card usage in that demographic is really low. Instead they prefer BNPL services as a credit mechanism. Banks have also responded and offer credit cards that don’t act like normal credit cards[1]<p>[1] <a href="https://www.commbank.com.au/credit-cards/commbank-neo.html" rel="nofollow">https://www.commbank.com.au/credit-cards/commbank-neo.html</a>
As a foreigner in Australia, I can't help but to think that Australians really don't know how to handle finances and are too irresponsible to use a credit card, so Afterpay and Zip stepped in.<p>Maybe it's because I grew up in Europe, but "Don't buy it if you can't afford it" has served me well. The majority of people I know just use credit cards for the perks but never miss a full payment.
I've just come to accept that I'll never understand corporate finance. Based on the data I could find, this works out to a sales price of about 76 times <i>revenue</i> for Afterpay. Even for a fast growing company, how can they ever grow into that valuation? Of course, it's an all stock deal, so perhaps it's better to just consider what percentage of Square they're giving to Afterpay stockholders, but I still just can't wrap my head around these prices given the revenue numbers.
Every time I see one of these announcements, the valuations go up and up and up and up. I remember not long ago being wowed by a 1B acquisition. That was called a unicorn because of how incredible it was. And now we're at 29B. Is this just because money is all a joke?
$29B is a pretty significant, even for an all-stock acquisition and a company of Square's size.<p>It would be interesting to see the motivation for this beyond a "shared mission" or "economic empowerment."
Afterpay's business model relies on high merchant fees which merchants, under their merchant agreement, are not allowed to pass onto their customers. So from customers point of view, afterpay often appears to be cheaper than other payment channels such as credit card / paypal.<p>Afterpay roll into a new merchant, cannibalise existing payment systems and at leat for the low margin merchants I work with, who are not savvy enough to look at their own sales data, their business becomes less profitable.<p>Their whole business model is deeply unethical IMO, harms merchants and harms customers who do not use Afterpay as merchants have to amortize cost of business across all their customers. The Australian regulator dropper the ball last year when considering legislation to align Afterpay with credit card instruments on this issue. Eventually regulators will realise this is harmful behaviour and align things correctly.
I have noticed that there isn't a lot of chatter on HN about Square. But on closer inspection it is a fascinating success story. They are building and cornering a whole ecosystem there. And their valuation is remarkable. Not just hype, but execution. Kudos to them.<p>Between them and Stripe, it's nice to have something in payments to admire and be excited about.<p>I remember a time when we had to deal directly with Authorize.net, wow that was a mess!
As a customer are there any downsides to using these BNPL platforms when I'm buying something? I generally never buy anything online that I can't afford to pay for it outright so I have never used them before.
Square is buying a loan shark service.<p>"The Australian Securities and Investments Commission found one in five buy now, pay later users is missing payments, half of users aged between 18 to 29 cut back on essential items to make repayments, and more than 1.1 million transactions in 2019 incurred multiple missed payment fees.<p>It also warned 15 per cent of users, and half under 29, had taken out an additional loan to pay for the services, while 55 per cent of consumers paying late had used at least two different buy now, pay later providers in the past six months."<p><a href="https://www.afr.com/companies/financial-services/one-in-five-buy-now-pay-later-users-are-missing-payments-20201116-p56evk" rel="nofollow">https://www.afr.com/companies/financial-services/one-in-five...</a>
I've seen the afterpay button when shopping online. Hate to say it, but this is absolutely taking advantage of people with poor spending & saving habits. I see it mostly at overpriced/luxury/hype online stores, where the desire to own a product doesn't come from a place of need, but from society & marketing. I buy some of this stuff, so I'm not hating on that. But some people are truly addicted to shopping, and enabling that is morally wrong.
Interesting that square is making this kind of large purchase. I’ve not been following them too closely but what I have noticed recently is a ton of local (SF) merchants switching from square to Toast.
Kinda amazed at how different the leadership is between Square and Twitter under Dorsey. You can tell which company he is spending most of his time with and which one is getting neglected.
Seems like a simple value proposition here:
BNPL is growing like crazy. Square doesn't have a strong product in BNPL space. Add to that it will get a presence in AUS/NZ and it becomes a good value to Square expanding product and global footprint. Paying about 20-25% of it's market cap to acquire a company at appx 20X multiple of it's revenue with a growth rate of 1X.
Seems like a fair deal in today's hot market.
Is there anything else to it ?
This is crazy - 10% of Mastercard for a lame service! The existence and success of Afterpay and Quadpay (now Zip) prove one thing - people don't have money enough cash or credit and this is sad!
Horrible. People ought to know enough to not use these products in the first place, but people will use it anyway. They should be required to show the long term effects before being used, much like the gore packaging used on cigarettes in some places. What’s the financial equivalent of lung cancer or having a stoma?
Like the payment networks, payment gateways will soon be dominated by a few big players: Stripe, Square<p>I really wish digital currency (ETH, BTC) would take off in the main stream world. The amount of silent middlemen involved in paying a merchant with a credit/debit card is nauseating to say the least.
I got hopeful when I read "Scheme Implementation," but unfortunately lisp for financial services doesn't seem to be the goal. Maybe someday.