Fintech

How Afterpay could fulfill Jack Dorsey’s digital-wallet dream

Square has struggled for years to reach consumers, including an embarrassing failure with Starbucks. The Afterpay deal is its second chance.

Square CEO Jack Dorsey and former Starbucks CEO Howard Schultz

Square CEO Jack Dorsey greets then-Starbucks CEO Howard Schultz in 2012.

Photo: F. Carter Smith/Bloomberg via Getty Images

At first glance, Square's $29 billion deal to buy Afterpay looks like a smart move into the fast-growing "buy now, pay later" space. But it's far more significant than just offering consumers the short-term installment plans that have grown popular among credit-wary young shoppers.

With the Afterpay deal, Jack Dorsey is making a strategic turn, linking the core Seller and Cash App businesses more closely after years of fostering them as independent units under the Square umbrella. Afterpay could turn into a $29 billion bridge between Square's many businesses, bringing Square's business success and customer ambitions into a single product. In doing so, Dorsey's also potentially fulfilling a decade-long dream of having a brand that dominates the way people shop and pay. It just won't be called "Square."

Square struggled to get consumers to adopt its apps in its early years, despite having a charismatic founder, distinctive design and an almost cult-like following among small business owners. It didn't help that it kept changing the name: Pay With Square, Card Case, Wallet, then Order (R.I.P., all of them).

Even a huge deal with Starbucks to let customers order lattes with the Wallet version of the app in 2012 — two years before Starbucks would introduce its own app — couldn't realize Dorsey's ambitions of getting space on people's home screens. Square eventually faced up to this reality, killed off the app, undid the Starbucks relationship and called the business unit that processed payments and made hardware for merchants "Seller."

So where's Buyer? As Wallet was floundering, Square launched a side project called Square Cash in 2013. Now known as Cash App, what started as a simple Venmo knockoff is now a major money machine for Square. In 2015, Cash added business payments. Rappers started dropping their cashtag in lyrics. By 2018, you could buy bitcoin; by the next year, stocks.

Seller, meanwhile, was branching out from physical retail into online. It added website building (with the Weebly acquisition), invoices and a host of other features. Those proved crucial during the pandemic when lockdowns forced many small retailers to rely on ecommerce to survive.

"Buy now, pay later" is still a small part of consumer credit. But merchants like the installment plans, because they lift conversion rates. And companies like Affirm and Klarna are betting that once a shopper uses their services, they'll come back for their next purchase too. Klarna has gone on an acquisition spree to add features to its app. Square is betting that Afterpay will turn Cash App from a money-sending and investing app into a spending app too — a financial super-app.

There's also PayPal, which also wants to make its already popular mobile payments tool a super-app — one app to pay for almost anything. It also offers "buy now, pay later" plans. Square will be tackling PayPal in an area of strength, ecommerce, while fending off PayPal's attempt to chip away at its in-store payments with its iZettle acquisition. (Past attempts by PayPal to compete with Square were kind of embarrassing: Remember that triangular dongle?)

Square's strategy most resembles Klarna's, including adding tools for discovering merchants. (Shades of the past: Discovering Square sellers nearby was a key feature of the Card Case app.) But it has the huge advantage of the installed base of Cash App, which, after the deal closes, will be where Afterpay shoppers go to manage their payments.

That will mean tighter links between Seller and Cash App. Though Cash App has obviously benefited from the company's payments expertise, it hasn't found many ways to benefit from Square's seller base, or to benefit them. Cash App users can spend their balances at Square registers, if they get a physical debit card or persuade a harried clerk to find the Square point of sale app's QR code to scan.

In this scenario, "buy now, pay later" is a way to get Cash App users to start thinking about using the app to do more than send money to friends. Cash App users might tap a pay-in-four plan, or might use a linked credit or debit card, or spend a stored balance. What that adds up to: Dorsey has finally gotten his wallet app.

Policy

The Senate antitrust bill just created some very weird alliances

Democrats and Republicans have found the tech reform debate scrambles traditional party politics — and Tim Cook and Ted Cruz have found themselves chatting.

The Senate Judiciary Committee advanced a bill on Thursday that could remake the tech industry.

Photo: PartTime Portraits/Unsplash

Strange alliances formed ahead of Thursday's vote to advance a key antitrust bill to the Senate floor, with frequent foes like Sens. Amy Klobuchar and Ted Cruz supporting the measure, and prominent Democrats including California Sen. Dianne Feinstein pushing back against it.

Ultimately the bill moved out of the Senate Judiciary Committee by a vote of 16-6 after a surprisingly speedy debate (at least, speedy for the Senate). Even some of the lawmakers who called for further changes agreed to move the bill forward — a sign that the itch to finally regulate Big Tech after years of congressional inaction is intensifying, even as the issue scrambles traditional party politics in a way that could threaten its final passage.

Keep Reading Show less
Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.

Sponsored Content

A CCO’s viewpoint on top enterprise priorities in 2022

The 2022 non-predictions guide to what your enterprise is working on starting this week

As Honeywell’s global chief commercial officer, I am privileged to have the vantage point of seeing the demands, challenges and dynamics that customers across the many sectors we cater to are experiencing and sharing.

This past year has brought upon all businesses and enterprises an unparalleled change and challenge. This was the case at Honeywell, for example, a company with a legacy in innovation and technology for over a century. When I joined the company just months before the pandemic hit we were already in the midst of an intense transformation under the leadership of CEO Darius Adamczyk. This transformation spanned our portfolio and business units. We were already actively working on products and solutions in advanced phases of rollouts that the world has shown a need and demand for pre-pandemic. Those included solutions in edge intelligence, remote operations, quantum computing, warehouse automation, building technologies, safety and health monitoring and of course ESG and climate tech which was based on our exceptional success over the previous decade.

Keep Reading Show less
Jeff Kimbell
Jeff Kimbell is Senior Vice President and Chief Commercial Officer at Honeywell. In this role, he has broad responsibilities to drive organic growth by enhancing global sales and marketing capabilities. Jeff has nearly three decades of leadership experience. Prior to joining Honeywell in 2019, Jeff served as a Partner in the Transformation Practice at McKinsey & Company, where he worked with companies facing operational and financial challenges and undergoing “good to great” transformations. Before that, he was an Operating Partner at Silver Lake Partners, a global leader in technology and held a similar position at Cerberus Capital LP. Jeff started his career as a Manufacturing Team Manager and Engineering Project Manager at Procter & Gamble before becoming a strategy consultant at Bain & Company and holding executive roles at Dell EMC and Transamerica Corporation. Jeff earned a B.S. in electrical engineering at Kansas State University and an M.B.A. at Dartmouth College.
Workplace

Should your salary depend on meeting DEI goals?

Diversio just raised $6.5 million to use AI to fix DEI.

Laura McGee has spent her entire career thinking about diversity and business. At one point, she helped lead the Trump-Trudeau Council for Advancement of Women, working with the prime minister and president to build a plan to grow the North American economy through diversity. During that time, she kept hearing from CEOs that they cared about diversity and wanted to improve, but that they had “no data and no metrics.”

That was when she decided to build Diversio: a platform that makes data collection, as well as acting on it, “super simple.”

Keep Reading Show less
Michelle Ma

Michelle Ma (@himichellema) is a reporter at Protocol, where she writes about management, leadership and workplace issues in tech. Previously, she was a news editor of live journalism and special coverage for The Wall Street Journal. Prior to that, she worked as a staff writer at Wirecutter. She can be reached at mma@protocol.com.

Boost 2

Can Matt Mullenweg save the internet?

He's turning Automattic into a different kind of tech giant. But can he take on the trillion-dollar walled gardens and give the internet back to the people?

Matt Mullenweg, CEO of Automattic and founder of WordPress, poses for Protocol at his home in Houston, Texas.
Photo: Arturo Olmos for Protocol

In the early days of the pandemic, Matt Mullenweg didn't move to a compound in Hawaii, bug out to a bunker in New Zealand or head to Miami and start shilling for crypto. No, in the early days of the pandemic, Mullenweg bought an RV. He drove it all over the country, bouncing between Houston and San Francisco and Jackson Hole with plenty of stops in national parks. In between, he started doing some tinkering.

The tinkering is a part-time gig: Most of Mullenweg’s time is spent as CEO of Automattic, one of the web’s largest platforms. It’s best known as the company that runs WordPress.com, the hosted version of the blogging platform that powers about 43% of the websites on the internet. Since WordPress is open-source software, no company technically owns it, but Automattic provides tools and services and oversees most of the WordPress-powered internet. It’s also the owner of the booming ecommerce platform WooCommerce, Day One, the analytics tool Parse.ly and the podcast app Pocket Casts. Oh, and Tumblr. And Simplenote. And many others. That makes Mullenweg one of the most powerful CEOs in tech, and one of the most important voices in the debate over the future of the internet.

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editorial director. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Enterprise

Why low-code and no-code AI tools pose new risks

The low-code trend has come to AI, but skeptics worry that gifting amateurs with Easy-Bake Ovens for machine-learning models is a recipe for disaster.

The same things that make low- and no-code AI so appealing can pose problems.

Image: Boris SV/Moment/Getty Images

“No code. No joke.”

This is the promise made by enterprise AI company C3 AI in splashy web ads for its Ex Machina software. Its competitor Dataiku says its own low-code and no-code software “elevates” business experts to use AI. DataRobot calls customers using its no-code software to make AI-based apps “AI heroes.”

Keep Reading Show less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Workplace

How 'Dan from HR' became TikTok’s favorite career coach

You can get a lot of advice about corporate America on TikTok. ‘Dan from HR’ wants to make sure you’re getting the right instruction.

'Dan from HR' has posted hundreds of videos on his TikTok account about everything from cover letters to compensation.

Image: Dan Space

Daniel Space downloaded TikTok for the same reason most of us did. He was bored.

At the beginning of the COVID-19 pandemic, Space wanted to connect with his younger cousin, who uses TikTok, so he thought he’d get on the platform and try it out (although he refused to do any of the dances). Eventually, the algorithm figured out that Space is a longtime HR professional and fed him a post with resume tips — the only issue was that the advice was “really horrible,” he said.

Keep Reading Show less
Sarah Roach

Sarah Roach is a reporter and producer at Protocol (@sarahroach_) where she contributes to Source Code, Protocol's daily newsletter. She is a recent graduate of George Washington University, where she studied journalism and mass communication and criminal justice. She previously worked for two years as editor in chief of her school's independent newspaper, The GW Hatchet.

Latest Stories
Bulletins