Afterpay: No changes to Australian brand after reported US shake-up

Afterpay says it has no plans to shake up its Australian brand, despite reports its American operation will be merged with peer-to-peer payments platform Cash App, and payment experts flagging significant regulatory changes at home in 2024.

Capital Brief reports Afterpay parent company Block plans to combine the Australian-born platform with Cash App in the United States, in a move that could cease Afterpay as a standalone brand in the U.S. market.

In a statement provided to SmartCompany on Monday, an Afterpay spokesperson pointed to close connections between the BNPL provider and its Block stablemates in the U.S.

“Connecting Afterpay to the Cash App and Square ecosystems was part of the deal thesis when the acquisition was announced,” they said, referring to Block’s US$29 billion (AU$39 billion) purchase of Afterpay in 2021.

“Progress on the integration has already been made in a number of areas and it will continue.”

Reports of Afterpay taking shelter under the Cash App umbrella emerged after Block laid off approximately 1,000 staff — itself part of a broader tech sector trend towards more conservative forecasts for 2024.

But no similar Afterpay brand mergers are on the cards in Australia, where Cash App does not operate.

“There are no changes planned to the Afterpay brand at this time and we remain committed to the Australian market,” the Afterpay spokesperson said.

Changing regulations to alter BNPL landscape

Domestically, Afterpay has championed its recent successes and foothold in the retail market.

BNPL transactions through Afterpay rose 25% over the 2023 Black Friday and Cyber Monday period compared to 2022, and Afterpay transactions at Square users more than doubled over the same period, the fintech said.

Afterpay is now used by 15.2% of Australians, according to Roy Morgan, and remains Australia’s best-known BNPL offering.

And Afterpay Day is still hailed as a major revenue-raiser for e-commerce brands across Australia.

Yet a suite of economic and regulatory changes promise to alter Afterpay’s trajectory in Australia this year, says Brad Kelly, a payments industry consultant whose CV includes appointments at Mastercard, NAB, and HSBC.

Speaking to SmartCompany, Kelly said incoming regulation that will treat BNPL offerings like traditional credit products with responsible lending obligations could dramatically reshape Afterpay’s local offering.

If Afterpay and its competitors are required to hold an Australian Credit Licence, the next step would be for Afterpay to simply launch an old-school credit card with existing BNPL functions tacked on, Kelly said.

Doing so would also aid Afterpay in the fight against debit card usage, and existing credit card providers.

But it would also mark a major backflip for the brand, which has long positioned itself as a gamechanging competitor to traditional credit cards.

Kelly said Afterpay’s existing forays into card-like payments, including the Afterpay Plus service, only do so much for the brand.

“That’s the problem for them —  they’re not ‘top of wallet’ and never have been, never will be,” Kelly said.

“So the idea is to get a card into your wallet that you use every day. And the only card that can do that is either a debit card or credit card.”

Surcharging on the radar

Beyond those licensing reforms, new Reserve Bank of Australia governor Michelle Bullock has signaled the central bank may allow merchants to surcharge customers when they make a BNPL transaction.

BNPL providers traditionally command much higher surcharges than debit and credit card transactions, meaning BNPL surcharges could pass considerable costs to the consumer.

“The reality is that for small businesses, the impost [of BNPL merchant fees] is far too much to absorb into the cost of doing business, especially at the moment,” Kelly said.

While payments experts contemplate what the future of Australia’s BNPL scene looks like, Block itself will reveal further information when it shares its Q4 report in the coming days.