What's going on?

US payments giant Square proceeded to checkout with plans to buy Australian fintech Afterpay for $29 billion on Monday.

What does this mean?

Afterpay is a buy-now-pay-later company that lets its 16 million customers spread the cost of an online purchase over a period of time, without racking up interest on those payments (providing they make them on time). It�s an area that�s gone gangbusters recently: Adobe Analytics has pointed out that use of buy-now-pay-later services had more than tripled early this year versus the start of the pandemic.

Square, for its part, is hoping the deal will boost both its consumer and business segments. In the former�s case, there�ll be more people in its orbit who it�ll be able to win over to its money transfer service, Cash App. And since Square�s business customers will be able to offer even more payment options to their customers, it should increase revenue on the business side too.

Why should I care?

For markets: There may be trouble ahead.

No cash is actually changing hands here: instead, Afterpay�s investors will receive 0.375 Square shares for every Afterpay share they hold. That might�ve made sense to Square�s top brass, given that its stock has doubled in the last year. But as is traditional when a firm agrees to buy another one, its stock actually fell on Monday: a deal this big on a company in an area ripe for a crackdown isn�t without risks, after all…

The bigger picture: The industry�s proving its mettle.

Afterpay�s revenue was $693 million last financial year, which means Square�s $29 billion purchase price represents 42x trailing revenue. That might seem high, but Swedish rival Klarna was valued at $46 billion back in June with revenue of around $1.2 million in 2020 � a 38x multiple (tweet this). America�s Affirm, meanwhile, began Monday valued at roughly 20x revenue. Investors have noticed: they sent Afterpay�s shares up 6% following the announcement.