Afterpay is bringing buy now, pay later to the Cash App Card
Afterpay is currently testing new ways to offer installment payments via its sister service Cash App. It represents the latest attempt by fintech companies to bring buy now, pay later services to places beyond the checkout page.
Since early 2024, Afterpay has been beta testing a short-term consumer loan product for Cash App Card transactions. It allows customers to convert purchases they’ve made using their card into a pay-in-four style loan, in exchange for a small fee, with the option to pay it off early. Unlike a credit card that would have interest added to balances carried over from month to month, this type of installment plan has a fixed fee the user is aware of in advance. The company wouldn’t share how many consumers are eligible for the product or provide specific details about its performance. But the company has said in earnings reports and statements to media that it’s seeing “strong adoption” and plans to scale the product in the coming months.
Nick Molnar, CEO and co-founder at Afterpay, said this beta test is part of a broader push to integrate Afterpay and Cash App. Payment platform Square launched Cash App in 2013 as a peer-to-peer payment service. It acquired Afterpay in a $29 billion deal in August 2021, then rebranded as the umbrella company Block later that year. Today, Cash App has about 57 million active monthly users, around 40% of whom use the Cash App Card — which could in turn lead to more installment payment users.
“We’re really at the starting point of the execution of this product,” Molnar said in a call with 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.”
Block’s attempt to bring Afterpay and Cash App closer together points to an underlying trend in the BNPL space, where providers are attempting to layer their products onto more platforms or methods of payment. Affirm in June announced that installment plans will come to Apple Pay transactions this fall. BNPL provider Zip launched a pilot with Google Pay in January 2024. Meanwhile, legacy financial institutions like JPMorgan Chase and American Express have begun to offer their own installment plans to customers who want to divvy up past purchases.
These developments show that maturing BNPL companies are looking for distribution beyond the checkout page of a single retailer. When they first launched in the United States, services like Affirm and Afterpay sought to grow by striking deals with more merchants in more categories, ranging from beauty to travel. Now, linking the plans to cards or wallets may be one of the biggest growth opportunities.
A new report from Splitit and Pymnts this month found that 33% of shoppers would use an installment plan linked to their credit card for a big-ticket item. Around 82% of merchants say they’ve seen increased in-store usage of card-linked installment plans. And the vast majority — around 97% of merchants — plan to innovate their card-linked installment plans at some point, or more than one-third in the next year.
At Afterpay, the integration relies on expanding the use of the Cash App card, which a user can link to their personal bank account. Molnar, as part of a new role at Block, will be focused on building out sales for the Square team, and “connecting our ecosystems and consumer scale with Cash App,” Block CEO Jack Dorsey said during the company’s second-quarter earnings report.
Molnar, who will be overseeing the integration as well as sales for Square, is bullish that the service will gain more transactions as younger consumers tire of using traditional credit cards. Millennials and Gen Z will represent almost 50% of all contributions to retail spending by 2030, Molnar said, meaning their preferences will increasingly become the norm. Based on Block’s second-quarter earnings, Cash App saw gross profit grow 23% year over year to $1.3 billion, driven in part by strong performance from the Cash App Card, Cash App Borrow and BNPL usage.
“I think what retailers are looking for is access to that next-generation consumer, that millennial and Gen Z cohort,” Molnar said. “We’re wired to think differently about money and spending. I do believe the optionality that we provide at checkout, will become more and more relevant, and the growth in the U.S. is really just scratching the surface.”
This ethos is evident in other companies that are thinking about distribution and how to grow their services. Klarna, which shut down its rewards program earlier this year, is rolling out its own card to encourage further usage. It’s also angling for growth with Klarna Plus, a membership-style subscription service for $7.99 a month that gives users rewards, waived fees and special offers for shopping at brand partners. It has surpassed 100,000 users and has saved customers an average of $18 a month, the company said earlier this summer.
Jinal Shah, CMO and general manager of shopping at Zip, said the goal is to ensure that the service can be used anywhere a customer wants to shop, whether in-person, on an app or a mobile browser. While Zip would not provide specific performance data for the Google Pay rollout, Shah compared it to how a direct-to-consumer company would get into wholesale partnerships. “Like in-store distribution, that’s where the customers are,” she said. “You don’t want to make it difficult for a customer to look for you, and that is no different in this space as well.”
At Affirm, distribution spreads across browsers, e-commerce platforms like Shopify or Wix, PSP platforms like Stripe and digital wallets like Shop Pay. It also operates the Affirm Card, a key area of growth for the company that crossed one million users this year from just 50,000 last year.
People can swipe the card to pay for in-person transactions, swipe it to split later or use it for pre-planned purchases. Affirm CEO Max Levchin said during the third-quarter earnings call in May that the company is continuing to make “tweaks and fixes” to the user interface. “My last conversation before I walked into this one was with one of our card leaders right outside this room, just to give you a sense for where I spend my time,” he told analysts during the call.
But it’s also eyeing other partners. Earlier this year, Affirm CFO Michael Linford said that the goal of these new distribution plans is to make it easier for people to adopt Affirm. Wallets in particular are an important tool because they can scale. “The bigger the wallet, the more impactful it is to us in terms of [giving] consumers who know us and love us, another chance to see us,” Linford said in a fireside chat with Barclays in June. “We think this opens up both the opportunities for consumers to use us and the number of consumers we can get to, which really is summarized maybe best as a pretty big addressable market opening up for us here that we wouldn’t get before.”
Beyond the Cash App Card testing, Molnar said Afterpay is looking to grow its distribution by getting more partners in various verticals, such as travel, and encouraging more in-store uses with retail partners. But he doesn’t shy away from the competition in the space as other companies seek to grow their networks, score new retail partners and expand distribution. Looking ahead, that could mean consumers are given just as many BNPL services as there are payment options.
“What you’ve had seen in the market is that a variety of buy now, pay later providers provide unique customer bases,” Molnar said. “Our demographics aren’t all the same, our scale isn’t all the same, and so I don’t think it’s mutually exclusive. It’s very much a thing of five years ago to have a single buy, now, pay later provider at a checkout.”