- Square plans to acquire Australia buy now, pay later Afterpay in a $29 billion all-stock deal.
- Banks and payments companies could also look to acquire their own BNPLs in the wake of the deal.
- Here are the 8 players in the BNPL space still operating independently that could be targeted.
Buy now, pay later is the fastest growing area in payments, and experts say dealmaking is set to ramp up in the space.
Square is the latest buyer, announcing plans to acquire Afterpay in an all-stock deal valued at $29 billion in one of the largest fintech acquisitions to-date that pits it squarely against rival payments player PayPal. The deal was a competitive one, with Afterpay receiving interest from at least six potential buyers, according to Reuters.
Appetite for BNPLs has been on the rise. Australian ZipCo acquired US-based QuadPay in September 2020. And Alliance Data Services, one of the leaders in co-branded credit cards, acquired white-label BNPL player Bread in December last year.
What started as a niche, point-solution offered by early movers like Affirm, Afterpay, and Klarna has become table stakes in e-commerce and often a key part of a larger suite of financial offerings. PayPal’s pay-in-four option exists within its checkout flow, and Apple has plans to add installment payments via Apple Pay.
And while firms could build out their own BNPL feature from scratch— something PayPal did — adding a company with a built-in consumer audience, in addition to relationships with merchants, is a way to jumpstart those efforts.
Now experts say more deals are likely to occur in the space. As BNPL grows beyond its point-solution roots, banks and merchants see it as a way to engage customers and build brand loyalty.
One strategy that could lead to M&A is weaving buy now, pay later into an existing spending option, like a digital wallet or credit card.
Potential buyers there include Apple, Amex, Capital One, and co-branded card giant Synchrony, Lisa Ellis, general partner and payments analyst at MoffettNathanson, told Insider.
There are also e-commerce infrastructure players like Shopify that could look to BNPL as an additional service to sell their merchant partners. Shopify already has integrations with several BNPL players, and owns a stake in Affirm.
Companies that process payments on behalf of merchants could also be in the market for a BNPL. That space includes Adyen, JPMorgan Chase, FIS, Fiserv, Global Payments, and Stripe.
“You could very well see another round of consolidation in the merchant acquiring space, which we’ve been waiting for for a while, but it’s been sidelined because of the pandemic,” Ellis said.
Rather than building out a BNPL, these infrastructure players will likely consider ways to “beef themselves up competitively so that they’re bigger and stronger and can effectively compete against not just PayPal, but also a bigger, badder Square,” Ellis added.
Here are 8 BNPL players that could make for attractive acquisition targets.
Founded in 2012, Affirm is one of the few BNPL players that issues loans, rather than just installments. It has 5.4 million active customers that transact twice per year, on average. Whereas many BNPLs have focused on discretionary spend in things like apparel and cosmetics, Affirm has carved a niche in larger purchases.
Over a third of its purchase volume comes from Peloton sales, and it’s leaning into more considered spending areas like travel. Via its partnership with Cross River Bank, Affirm can lend up to $17,500 over several months (as high as 39 months on Peloton purchases).
Affirm has invested heavily in its own brand in recent months, launching a debit card and pushing its users to start their shopping journeys on its app or website.
Stripe and Amex, too, could be contenders, Ellis said.
A spokesperson for Affirm declined to comment.
Amount is a behind-the-scenes BNPL player, selling software for its customers to roll out consumer banking and point-of-sale financing with their own branding.
Amount announced a partnership with Barclays in April, offering its BNPL tech to Barclays’ retail co-branded credit card partners.
Founded in 2019, Amount has raised more than $240 million to-date from investors including Barclays, Goldman Sachs, WestCap, which is also an investor in Klarna.
A spokesperson for Amount declined to comment.
Jifiti is another infrastructure player selling buy now, pay later capabilities to retailers and banks. It got its start in other retail software, like gift cards and registry management. Now, it powers Citizens Bank’s point-of-sale financing option.
Founded in 2011, Jifiti has raised $6.8 million to-date.
Yaacov Martin, cofounder and CEO at Jifiti, told Insider more partnerships and deals between incumbents and startups is a good bet.
“The merge of the ‘old’ and the ‘new’ is what is bound to bring the most successful outcome,” Martin said via email. “Consolidation of ‘fintech to fintech’ on this level is new and exciting, however, the true value potential lies in the consolidation between ‘traditional’ and fintech.”
At a $46 billion valuation, Klarna is Europe’s most valuable startup. Beyond the typical pay-in-four feature, Klarna also issues larger installment loans. It has also partnered with major retailers like Macy’s.
Klarna has 90 million active customers and is live in 17 markets. In the US, it has 17 million active customers and has integrations with 24 of the top 100 US retailers.
Klarna has raised $3.7 billion to-date backed by General Catalyst, Sequoia, and SoftBank.
A spokesperson for Klarna declined to comment.
Nate is a newer entrant to the BNPL scene, with more of a focus on being consumers’ go-to shopping app. It offers one-click checkout (another hot industry) as well as installment payments.
Founded in 2018, Nate has raised $47 million to-date from investors including Coatue, Canaan Partners, and Renegade Partners.
Albert Saniger, CEO of Nate, told Insider the startup has been approached by buyers, but it’s not something the company is considering.
Still, Saniger acknowledged that dealmaking should ramp up in the space.
“I think the realization is that there are payments players and e-comm infrastructure companies better positioned to deliver these services at scale, compared to independent BNPL players,” Saniger said via email.
Sezzle is based in Minnesota and publicly traded in Australia, offering interest-free split-in-four payments.
Sezzle announced a 3-year contract with Target in June and has integrations with e-commerce platforms like BigCommerce and Shopify. It launched Sezzle Capital in July, powered by e-commerce lender Wayflyer, through which it can lend to its merchant partners.
Sezzle has a market cap of about $800 million.
A spokesperson for Sezzle did not return a request comment in time for publication.
Some BNPL players do hard credit checks and issue interest-bearing loans. Others don’t check credit at all, instead relying on a user’s history with the service to make a credit decision.
Splitit looks to users’ existing lines of credit to make its PoS financing decisions. Splitit doesn’t charge interest or late fees, and users repay the installments via their credit cards.
Also listed publicly in Australia, Splitit is based in New York and was founded in 2012. Splitit has a market cap of about $200 million.
Brad Paterson, CEO of Splitit, told Insider that there isn’t a need for consolidation in the short or medium term.
“Whether to build, buy, or partner will no doubt be an active discussion at numerous deal tables, however I don’t expect the focus to be on buying a customer base,” Paterson said via email.
Uplift is a BNPL service geared toward travel. It counts major travel brands like Carnival, Kayak, Southwest, and United as customers.
Uplift operates behind-the-scenes, allowing companies to rebrand its software directly to customers. It facilitates the loans, but does so through its travel partners’ own brands.
Founded in 2013, Uplift has raised $146 million in equity and $543 million in debt to-date from investors including Credit Suisse, DNX Ventures, and Highgate Ventures.
A spokesperson for Uplift did not return a request comment in time for publication.