Square/ Afterpay - The Merchant Perspective

The recent announcement of Square’s acquisition of Afterpay is expected to have significant repercussions on the payments acceptance landscape, with the relative position of Square and Afterpay in the US and Australian markets highlights the opportunity for synergy between the services.  

In the US, Buy Now Pay Later is still in a stage of relative infancy; Square, on the other hand, has gained significant traction in the US market.   In addition to potentially offering the chance of growing Square’s merchant base, Afterpay could also create opportunities among existing Square customers. According to RFi Group’s H1 2021 US Merchant Acquiring Council study, acceptance of Buy Now Pay Later is considerably lower among Square merchants (15%) than the market (27%). At the same time, when looking at the appetite for BNPL among non-accepting merchants, Square merchants are more than twice as likely to be interested in BNPL acceptance compared to non-accepting merchants in general (22% vs. 10%).    

Growing the acceptance of BNPL could create significant benefits, not just for Square’s merchant customers, but for their customers too; Among merchants that accept BNPL, the most commonly identified benefit of BNPL acceptance was a better customer experience. However, ensuring that merchants are aware of the benefits that BNPL could bring to their business will be key to driving acceptance and ensuring that Square maximizes the opportunity presented by the Afterpay acquisition. RFi Group research has shown that non-accepting merchants are likely to underestimate the benefits that BNPL could deliver to their business, presenting a potential barrier to uptake that Square will need to address. 


In Australia, where the BNPL space is more mature, we do not see any meaningful differences in the levels of acceptance of BNPL or interest in accepting between Square merchants and merchants in general. By integrating Afterpay into the ecosystem, Square could leverage the dominance of Afterpay in the Australian BNPL space to grow its share among merchants; this will be particularly important as Australia undergoes increasing digitization of customer shopping behaviour in the face of ongoing lockdowns and other containment measures.  

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