Technology Stocks

Square Inc (NYSE: SQ) Acquires Afterpay Ltd (OTCMKTS: AFTPF): Visa Inc (NYSE: V) and Mastercard Inc (NYSE: MA) Should Be Scared

Jay Jacobs, SVP and Head of Research & Strategy at Global X ETFs ((NASDAQ: QYLD),  joined Yahoo Finance to discuss Square’s acquisition of Afterpay (OTCMKTS: AFTPF). Square’s Afterpay is a  $29 billion all-stock deal,  and it should shock (NYSE: V)  and (NYSE: MA).

S.Q. had previously announced its plan to acquire AFTPF in a blog post on August 1. 

Buy now,  pay later

With Afterpay, you can pay upfront, you make the deal, and then you get whatever you wanted. From there, you will make four installments to pay overtime to pay without accruing interest. 

Jacobs said that Afterpay makes money by pushing interest rate credit risk to the merchants. Afterpay is funding bills to make purchasing decisions easier for consumers.

This idea accelerates consumption and has good links with a platform that has a debit payment connection to a consumer’s bank account.

AFTPF is, without a doubt, going to charge a transaction fee to the merchant. In addition to the transaction fee will be a small fee of what will be lent out by AFTPF. As long as consumers clear their installments on time, they will pay a zero interest rate instead of 15%. S.Q.’s goal is to make many people buy more things regardless of price.

Jacobs adds that adding AFTPF will make S.Q. an enormous and compelling platform. He gives an example of how PayPal Holdings Inc (NASDAQ: PYPL)  has grown in a similar situation.  PYPL has already built its buy now, pay later system, which has developed as we speak.

There is also a possibility that the consumers will get the goods at a higher price than buying cash.

V and MA feel challenged

V and M.A.’s business models may feel disrupted because many consumers will now buy and pay later.

Just like credit cards, Jacobs said that some users end up not paying their dues on time. S.Q. has dedicated itself to carry on that AFTPYF risk. Jacobs adds that S.Q. has been lending business loans for a couple of years now. This AFTPY case is loaning to consumers.s

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