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.


Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

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Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

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The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.

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Photo: Noah Berger/Getty Images for Amazon Web Services

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Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

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We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

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Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

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Photo: artpartner-images via Getty Images

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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 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.

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