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Written by Cyndie Martini
on August 24, 2021

Fintechs and larger companies are going after buy now pay later (BNPL) firms. The latest is Square, which recently acquired AfterPay for $29 billion in an all-stock transaction. AfterPay is an Australian BNPL fintech. This acquisition extends Square's overall service offering. Its merchants will be able to offer BNPL to their customers. Customers using Squares BNPL will be able to manage their payments in Square's Cash App.

Square does not offer a credit card as a financing option. However, its merchants are able to accept major credit cards. In addition to extending its service offering, Square will add AfterPay's 16 million users to Cash App's existing 70 million users. Square also offers checking, savings, and loans products.

AfterPay's BNPL offering lets customers pay off a purchase in fixed installments over time. There is no interest if payments are paid on time. BNPL generates fees by charging merchants on transactions and millennials for late payments.

Apple is working on a BNPL offering, called Apple Pay Later, with Goldman Sachs, which provides the Apple Card. Apple Card already allows paying in installments for Apple devices. Apple Pay Later will apply to Apple Pay purchases, which can be used for non-Apple products. Apple is also teaming up with PayBright, a Canadian by now pay later firm.

Demographics for BNPL show that it is younger generations who are mostly using the service. In 2021, 45 million Americans used BNPL, which is an 81.2% increase YoY. Of that total, Millennials and Gen Z make up 73.2%, which is down from 80% in 2018. Millennials make up 40% of the group. Younger generations are more willing to try alternative payment options.

BNPL is attractive to younger consumers because they don't have to apply for a credit card, which can be difficult. Some younger consumers also don't want to take on credit cards.

Klarna and Affirm are the other big BNPL players. Afterpay was the second-most downloaded BNPL app in Q1 2021, putting it behind Klarna.

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