I've been contemplating the potential threat that Afterpay poses PayPal and thought it would be interesting to discuss the potential for a larger payments company, such as PayPal, to buy Afterpay.
Afterpay has been able to crack the instore market like no other digital payments company and has seen rapid uptake in Australia (and now US). Paypal has tried to launch a similar product, Paypal Credit.
Hypothetically speaking, it would be the largest acquisition PayPal has ever done, with iZettle coming in second at ~$3b AUD. PayPal has sufficient cash funds ($10.48 Billion AUD) to buy APT outright at more than double today's current price. However, it would be more likely to be a mix of cash, debt and equity at that size.
Potential synergies APT <> PYPL
Improved Loan Loss Rates:
PYPL: 0.22%
APT: 0.7%
Improved Transaction Costs:
PYPL: 0.98%
APT: 1%
Boost PYPL Other Revenues
The potential for an APT physical card (credit or similar)
Ability to ship APT product to 227 million active customers overnight
Regulatory & compliance costs are sunk into a much larger company
Acquire a stellar team with strong in-store/online retail experience
It would be great to hear everyone's thought on such a scenario. I previously wrote about why I think APT could be worth 10x and briefly mentioned an acquisition potential.
