Molnar ‘bullish’ on BNPL growth as Afterpay chapter endsClancy YeatesFebruary 1, 2022 — 5.18pm
Afterpay co-founder Nick Molnar has signalled the fintech’s top priority under new owner Block will be to ramp up growth by integrating the two businesses, adding that the buy now, pay later (BNPL) craze is still in its early days.
In a key milestone for Australia’s fintech sector, US technology giant Block, formerly called Square, completed its
takeover of Afterpay on Tuesday, with local investors being paid in Block shares.
Afterpay co-founder Nick Molnar, who now works for Block. EAMON GALLAGHER
Investors can still hold shares in the merged business on the ASX through a dual listing, but Block, led by Twitter co-founder Jack Dorsey, is based in the US and is mainly focused on that market.
Mr Molnar, who has joined Block alongside fellow co-founder Anthony Eisen, said the focus this year would be on integrating the two businesses, including by promoting Afterpay to Block’s customers, and vice versa.
On Tuesday, Block took its first step in this direction by announcing its business Square would start offering Afterpay’s short-term instalment loans to its online merchant customers. It plans to provide Afterpay to Square’s bricks and mortar merchants in the coming months.
“To be able to roll this out on day one, in line with the day that we announce the transaction, just illustrates the speed that we want to move,” Mr Molnar said.
“This first announcement is just a signal of what’s to come, and we’re really bullish and excited about the future.”
While the share prices of some BNPL firms
have tumbled in recent weeks and analysts have predicted growing competition as
more banks enter the sector, Mr Molnar sought to highlight the growth potential of the sector, which competes with credit cards.
“I definitely think BNPL is still in its very early stages of growth across the world, and more particularly in North America,” Mr Molnar said.
Block has fared better than ASX-listed BNPL specialists in recent weeks, with its shares rebounding by 6 per cent on Tuesday to $171.20. The stock has only fallen 3 cent so far this year.
Even so, investment analyst at Milford Asset Management, Roland Houghton, said the wider BNPL industry faced challenging conditions this year.
“It’s a tough backdrop for these businesses given government stimulus is less this year, and the cost of capital is going up given rising interest rates. Therefore, unprofitable technology stocks will probably struggle, and they’ve already de-rated thus far,” Mr Houghton said.
About 80 per cent of Afterpay’s shareholders have elected to convert their Afterpay shares into ASX-listed shares in Block.
A key rationale for the takeover is that both Afterpay and Block will gain new products, which they aim to cross-sell to customers as the company tries to
expand into the territory of banking.The head of Block’s merchant business Square, Alyssa Henry, said its retailer clients viewed Afterpay as a way to gain new customers and increase spending on their websites.
“We’re excited about how Afterpay can really help our sellers and help them grow their businesses,” Ms Henry said.
Cryptocurrencies such as bitcoin have been an important focus for Block and Mr Dorsey, and Afterpay last year indicated that offering users access to crypto assets
would probably be necessary to attract young customers.
Mr Molnar on Tuesday said introducing cryptocurrencies into Afterpay’s “ecosystem” had not been a priority, though it would assess customers’ demand for crypto exposure.
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