Square acquires Afterpay in August

Freelance contributer Chen Liu studied these two companies to see which one comes out on top

If you’ve made a purchase at a boutique shop recently, chances are your credit card payment was processed by Square, a U.S. financial services and digital payments company that touts itself as affordable for sellers.

In August, the company announced it intended to acquire Afterpay, in a deal with an implied value of $29 billion (U.S.). Afterpay is an Australian firm that specializes in buy-now-pay-later solutions whereby purchases made by customers are divided into four payments, paid every two weeks.

In its third-quarter fiscal 2021 results ended Sept. 30, Square reported revenues of $3.8 billion, up from $3 billion the previous year. The company reported a net loss of $2.9 million for the quarter, compared to a $36.5-million gain in 2020 driven by a $365-million increase in operating expenses year over year.

Andreas Park, a professor of finance at the University of Toronto, researches the intersection of technological transformation and financial markets. He notes that competition is stiff in the payment processing industry, which has necessitated diversification.

“(The companies) try to build a suite of options to tap into various payment methods. They also try to provide services in addition to payment. For example, Square does more than just credit card payment processing; it also has an internal system that allows (merchants) to know how many products they sold and when they sold them,” Park said.

“If you know how people spend their money, you could predict (a lot of things). I find that quite terrifying as there is a possibility for manipulation.”