Afterpay is currently testing new ways to offer installment payments through its sister service Cash App. This is the latest attempt by fintech companies to offer buy-now, pay-later services beyond the checkout page.
Since early 2024, Afterpay has been beta testing a short-term consumer loan for transactions made with the Cash App Card. It allows customers to convert purchases made with their card into an installment-style loan for a small fee and pay it back early. Unlike a credit card, which charges interest on balances rolled over from month to month, this type of installment has a fixed fee that the user knows up front. The company would not share how many consumers are eligible for the product or provide specific details on its performance. However, the company has said in earnings reports and media statements that it is experiencing “strong adoption” and plans to scale the product in the coming months.
Nick Molnar, CEO and co-founder of Afterpay, said this beta test is part of a broader initiative to integrate Afterpay and Cash App. Payments platform Square launched Cash App in 2013 as a peer-to-peer payments service. In August 2021, it acquired Afterpay in a $29 billion deal and renamed it Block later that year. Today, Cash App has about 57 million active monthly users, about 40% of whom use the Cash App Card – which in turn could lead to more installment payment users.
“We’re really at the beginning of implementing this product,” Molnar said in a phone call with Modern Retail. “To now give a customer who already uses the Cash App Card frequently the option to pay with that card in four installments is an incredible opportunity.”
Block’s attempt to bring Afterpay and Cash App closer together points to a fundamental trend in the BNPL space, where providers are trying to bring their products to more platforms or payment methods. Affirm announced in June that installment plans would be available for Apple Pay transactions this fall. The BNPL provider Zip launched a pilot project with Google Pay in January 2024. Traditional financial institutions such as JPMorgan Chase and American Express now offer their own installment payment plans to customers who wish to pay for their purchases in installments.
These developments show that maturing BNPL companies are looking for a distribution channel that goes beyond a single retailer’s checkout page. When they first launched in the US, services like Affirm and Afterpay tried to grow by signing deals with more merchants in more categories, from cosmetics to travel. Now, linking the plans to cards or wallets could 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 tied to their credit card for a big-ticket item. Around 82% of merchants say they’ve seen an increase in the use of card-linked installment plans in their stores. And the vast majority – around 97% of merchants – plan to renew their card-linked installment plans at some point, or more than a third in the next year.
At Afterpay, the integration is based on expanding the use of the Cash App card, which a user can link to their personal bank account. In his new role at Block, Molnar will focus on growing sales for the Square team and “connecting our ecosystems and consumer scale with Cash App,” Block CEO Jack Dorsey said in the company’s second-quarter earnings report.
Molnar, who will oversee integration as well as sales for Square, is optimistic that the service will see more transactions as younger consumers tire of using traditional credit cards. Millennials and Gen Z will account for nearly 50% of all retail spending by 2030, Molnar said, meaning their preferences will increasingly become the norm. Based on Block’s second-quarter revenue, Cash App reported a 23% year-over-year increase in gross profit to $1.3 billion, due in part to strong performance from Cash App Card, Cash App Borrow and BNPL usage.
“I think retailers are looking to access the next generation of consumers, millennials and Generation Z,” Molnar said. “We are wired to think differently about money and spending. I believe the freedom of choice we offer at checkout is becoming more and more relevant, and the growth in the U.S. is really just scratching the surface.”
That attitude is also evident in other companies considering distribution and expanding their services. Klarna, which ended its rewards program earlier this year, is now launching its own card to encourage continued use. The company is also looking to grow with Klarna Plus, a $7.99-a-month membership-style subscription service that offers users rewards, fee waivers and special offers on purchases from brand partners. The service now has over 100,000 users and saves 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 the service can be used anywhere a customer wants to shop, whether in person, through 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 enter 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 search for you, and it’s no different in this space.”
At Affirm, distribution is via browsers, e-commerce platforms such as Shopify or Wix, PSP platforms such as Stripe, and digital wallets such as Shop Pay. The company also operates the Affirm Card, a key growth area for the company, which has seen its user base exceed one million this year, up from just 50,000 last year.
People can swipe the card to pay for in-person transactions, swipe it to split it later or use it for pre-scheduled purchases. Affirm CEO Max Levchin said during the third-quarter earnings call in May that the company continues to make “tweaks and fixes” to the user interface. “My last conversation before I came in here was with one of our card leaders right outside this room, just so you have an idea of what I’m spending my time on,” he told analysts during the call.
But other partners are also being considered. Earlier this year, Affirm CFO Michael Linford said 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 are scalable. “The bigger the wallet, the more impactful it is for us in terms of giving consumers who know and love us another chance to get to know 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 reach, which is perhaps best summed up as opening up a pretty large addressable market for us here that we haven’t been able to reach before.”
Beyond testing the Cash App Card, Molnar says Afterpay is looking to expand its distribution by signing up more partners in different verticals like travel and driving more in-store usage with retail partners. But he’s not afraid of competition in this space as other companies look to expand their networks, sign up new retail partners and expand their distribution. Looking ahead, that could mean having as many BNPL services available to consumers as payment options.
“What you’ve seen in the market is that a variety of buy now, pay later providers offer unique customer bases,” Molnar said. “Our demographics are not the same everywhere, our scale is not the same everywhere, and so I don’t think they’re mutually exclusive. It was one thing to have a single buy now, pay later provider at a checkout just five years ago.”
