Afterpay has been beta testing buy now, pay later integration into Cash App Card transactions, with the goal of bringing BNPL loans across the entire peer-to-peer platform.
Block, formerly Square, has owned both companies since the 2021 acquisition of Afterpay. Launched in 2013, Cash App boasts a customer base of 57 million users, 40% of which use the Cash App Card. These users will soon be able to split their purchases using Afterpay’s pay-in-4 loans, a feature that’s been in-demand in its own right.
“BNPL continues to be a popular payment method among consumers, and vendors and issuers are all trying to grab a share of the spend,” said Ben Danner, Senior Credit and Commerical Analyst at Javelin Strategy & Research. “Afterpay is taking a play right out of the book of the major credit card issuers—offering an installment plan to a linked card. Several major issuers such as Chase have such programs which offer customers the ability to split payments into installments for a fixed monthly fee.”
Against the Value Proposition
Similar to credit card companies, Afterpay will also charge a “small fee” for BNPL transactions on the Cash App Card, which could signal a trend.
“If BNPL vendors move towards card-linked financing where consumers are expected to pay fixed fees, that fails to align with the initial value proposition of BNPL—a payment method that prides itself on no fees and no interest,” Danner said.
Increasing Demand
BNPL has become so popular among consumers that some experts have raised concerns about the mounting debt from these loans. Some have called it “phantom debt” because BNPL providers like Afterpay and Klarna haven’t been required to report their transactions to the NY Federal Reserve.
These concerns prompted the Consumer Financial Protection Bureau to issue an interpretive rule mandating that BNPL services operate more like credit card companies. BNPL providers will now need to issue statements to both regulators and consumers, and disclose any fees. Many BNPL services have pushed back, asserting that they operate with full transparency and that delinquencies are infrequent.
Although BNPL is undoubtedly due for more regulation, consumer demand for the ability to split purchases at the point of sale continues to grow. This trend suggests that means more companies will follow Block’s lead and incorporate the service into their payments platforms, much like how Apple recently integrated Affirm’s BNPL products into Apple Pay.
“We’re really at the starting point of the execution of this product,” Nick Molnar, CEO and Co-Founder at Afterpay, told Modern Retail. “To provide a customer that’s already using the Cash App Card on a frequent basis the ability now to use that card to pay in four is an incredible opportunity.”
