M&A Reciprocity: the Afterpay-Square deal. 

It is an embarrassment of retail riches: Afterpay brings 100s of thousands of merchants to the deal and Square brings a multiple of 10x that number.

Reciprocity

Key is enhancing Square (No-Bank Required) banking app: Cash App (formerly Square Cash):

  • On the consumer side, the obvious benefit is that BNPL provides Square a strategy to onboard shoppers into the Square Seller ecosystem.
  • On the merchant side Square can manage the loan in its Cash App and drive adoption via incentives to merchants and through its Boosts program

Wins:

  • Data data data. Square learns more about new customer behaviour and drives virtuous engagement. Like any laddered financial service offering, laying in BNPL allows Square to match payment and payroll activity: intelligently monitoring the consumer’s credit health.

    Debt-to-income (DTI) data is the holy grail of any decisioning engine.

  • Upstream Fishing: Afterpay does not have to wait at checkout for the user competing with other credit options. Like any smart lender, they can swim upstream in the relationship capturing the consumer early in the purchase journey. Square can (and will) integrate the newly minted BNPL service into their open-loop Cash Card (meaning the shopper can use the card at nearly any merchant)