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AfterPay versus Kredivo: a tale of two BNPL fintechs

Square’s acquisition of AfterPay isn’t the region’s only BNPL deal: Indonesia’s Kredivo gets SPACed.



This week in fintech payments started with a bang with the announcement that Square would acquire Australia’s AfterPay in an all-stock deal valued at $29 billion.

This isn’t the only buy-now pay-later acquisition from the region, though: Kredivo, the leading player in Indonesia, is also slated for acquisition by a U.S.-based SPAC listed on Nasdaq called VPC Impact Acquisition Holdings II. Or rather, its parent company is: Singapore-listed FinAccel.

(VPC’s first special purchase acquisition company, or SPAC, merged with Bakkt, the digital asset marketplace.)

The business models of Kredivo and AfterPay are quite different, reflecting the huge gaps between Indonesia and Australia. But the deals highlight how important BNPL has become, as more consumers seek to reduce their cost of borrowing from credit card companies.

AfterPay’s consumers tend to be millennials and Gen Z, while Kredivo caters to a broader population that often lacks access to credit cards, credit scores, or bank accounts.

AfterPay and Square

Although AfterPay is the market leader in Australia, where it has about 14 percent of the BNPL market, it actually has more users in the U.S. (where, in market share terms, it is small, at 2.2 percent).

Afterpay has two parts to its business: merchants and consumers. These are mutually reinforcing. It pioneered the model of dividing payments for retail goods into four instalments and charging fees to the merchant, who is happy to pay because it encourages more shopping.

It serves about 16 million consumers, of which only 3.4 million are in Australia and New Zealand; the rest are mostly in the U.S., as well as the U.K., Canada, and a few European markets. These consumers in the first quarter of 2021 used the app to make $4.1 billion in sales among 63,800 participating merchants.

This is small compared to Square (70 million consumers), which has a similar consumer-merchant wheel for its broader payments business, which includes merchant acquiring, point-of-sales, card issuance, lending, and even handling crypto. Square intends to integrate AfterPay’s BNPL business into its Seller app for merchants and Cash App for consumers.

In addition to a new product category, Square is also getting AfterPay’s customer base, particularly on the consumer side, which is valuable. AfterPay’s average Aussie consumer generates $647 in sales, much higher than what customers in the U.S. provide (because BNPL is still a work in progress there, given the prevalence of credit cards).

The business necessity of these companies is to increase engagement and activity between consumers and merchants, and for all of Square’s breadth and scale, it is still a distant number two or number three to PayPal by any metric. It has the tools but it needs more activity and more data to better monetize its users.

Although Square’s announcement of the acquisition cited global expansion, its markets are similar to AfterPay’s. It is more likely to use BNPL to drive more user engagement in the U.S. than try to grow into new geographies – unless of course Square uses more of its high-flying stock to find more companies to buy.

Kredivo: more than BNPL

Kredivo only operates in Indonesia, although it has plans to expand to Vietnam via a joint venture, as well as to Thailand and the Philippines. Indonesia is a crowded market for BNPL, with providers ranging from e-commerce platforms like Shopee and Traveloka, e-wallets like OVO and GoJek, and dedicated third-party rivals like Alibaba-backed Akulaku. Nonetheless, Kredivo enjoys over 40 percent of the local BNPL market, the company says. Its 4 million users represent nearly half the credit-card user base in Indonesia.

Whereas AfterPay focuses on creating a mutually reinforcing BNPL relationship between consumers and merchants, Kredivo has developed a more diversified business. It started out in 2016 with a 30-day installment offering followed by personal loans. The BNPL payments business caters to low-value purchases and a lot of repeat business. Kredivo has also established a higher interest-rate paying lending arm. As a result, almost all of its revenues come from consumers, whereas in developed countries, BNPL players like AfterPay, Affirm and Klarna earn more fees from merchatns.

Kredivo is also about to launch a neobank it will call Lime, using the license of Bank Bisnis (Kredivo acquired a 24 percent stake and has a call option to increase this to 75 percent). This will enable Kredivo to enter more lucrative businesses such as mortgages and wealth products, and go after a much broader market.

Underpinning this is Kredivo’s proprietary credit-scoring system, a necessity in a country lacking a traditional credit bureau.

Kredivo’s BNPL is basically a gateway to get people into a broader banking relationship. Its BNPL customer transacts on average 25 times a year – much higher than the likes of AfterPay or Affirm, where the average is below 10 times. It also takes a bigger cut of those transactions: 12.8 percent, versus global peers that are mostly below 10 percent. This reflects Kredivo’s greater usefulness in a country with a rising middle class with poor financial infrastructure. Its take rate is forecast to rise to 14 percent or more next year.

Which one adds the most value?

Other comparisons are harder to make. The various analyst reports consulted for this article focus on different things, and beyond BNPL, the business models vary.

But one comp is growth. Kredivo is forecasted to grow its revenues by 120 percent this year – and that’s down from a manic 283 percent leap in 2019. AfterPay in the first half of 2021 recorded 96 percent YoY growth. Neither company is profitable, although Kredivo may well enter the black in 2022, on the back of a rising take rate.

Square is acquiring AfterPay to muscle up against PayPal, Stripe, Adyen, and (theoretically) Alipay – all payment fintechs operating three-party networks that match consumers and merchants on their platform.

Eventually one of these platforms will be able to command the scale and valuations of a Visa or Mastercard – the masters of the traditional four-pillar payment models of consumer, merchant, card issuer, and acquirer. Visa and Mastercard, along with a handful of infrastructure players like FIS and Fiserv, are bigger than nearly any bank.

Square’s deal shows the importance of being a publicly listed company: although $29 billion is a hefty valuation for a loss-making fintech, if AfterPay turbocharges action on Square’s platform, a no-cash deal using a stock that’s enjoyed a huge market rally seems like a good idea.

Kredivo, via parent FinAccel, is much smaller, valued at $2.5 billion once the SPAC merger closes. It too will then be in a position to use equity to grow – although the more intriguing question may be which global payments fintech will decide that acquiring a fast-growing Indonesian player integrating BNPL into banking will provide them with true diversification.

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