Block’s Afterpay Shuts Down Money App, Ends Westpac Deal

Westpac said it will help Afterpay customers transfer funds to the accounts of their choice or make “competitive offers” to those who stay with Westpac. While it was keen to support Afterpay customers, Block is a more direct competitor given that its Square unit provides business loans in Australia.

Lee Hatton, the CEO of Money by Afterpay, stays with Block. “Our decision to move forward in this new direction is due to our exciting next chapter with Block, particularly as we think about the Cash App opportunities here in Australia,” he said in a statement.

Neither Afterpay nor Westpac have disclosed how many use Money by Afterpay, nor the dollar amount of deposits held. Afterpay declined to provide this information on Friday.

A company source said it was pleased with customer acceptance since the launch in October, and that the decision to shut down Money is due to Block’s strategy rather than market traction.

Afterpay Money was using Westpac but the relationship has ended.

The move is a blow to Westpac’s “banking-as-a-service” ambitions, as it sought to offer regulated deposits to fintech customers with a view to offering mortgages and loans in the future.

Afterpay was the main client of the strategy, which will continue. Westpac has struggled to attract younger customers and sees banking as a service (BaaS) as a way to grow its younger customer base by supporting alternative vendors of financial products. Flare, a platform to help employers engage workers, and SocietyOne, a personal lender acquired by MoneyMe, are other clients of the BaaS offering.

“A change of ownership naturally makes partnerships evolve and we have been working cooperatively with Afterpay on this transition to ensure a seamless journey for the customer,” said Westpac BaaS CEO Damien MacRae.

The Australian Financial Review reported the day after Block’s acquisition of Afterpay was announced in August last year that the Afterpay-Westpac alliance would be reconsidered in light of Westpac’s concerns about Square as a competitor in the market.

Block CEO Jack Dorsey said in recent earnings reports and in a strategy update that the company is interested in launching its main products, including Cash App, in all markets where it operates.

Square’s payment terminals are prominent in Australia and its business loans are growing. But the Cash App, used by around 45 million Americans, has not been available.

Cash App allows US customers to invest in stocks, buy bitcoin, file taxes, hold deposits, and spend. Buy Now, Pay Later, and Afterpay Shopping directories are being integrated into the app.

While Westpac wanted to back Afterpay, the Block acquisition changed this as Square competes aggressively with Westpac’s “merchant takeover” operations, which provide payment services to retailers. Square has been banking on the software and also offers working capital loans, in direct competition with commercial banks.

A Westpac source said it was not interested in getting involved in providing banking services through the Cash App should it move to Australia, given the potential competition and regulatory issues this would create.

Dorsey said in early August that he aspired for Cash App to become a “super app,” distinguishing it from the buy-now-pay-later players primarily focused on the installment product that has been copied by banks and other tech players. . But Cash App also offers Cash App Pay and Cash App Loans, and Boost, a feature that allows users to round up expenses to invest in stocks or bitcoin. Dorsey also wants to create a retail ecosystem that pushes app users to Square sellers.

“We believe that Cash App finally becomes a place you want to visit not weekly, but every day, because it constantly provides a good insight into your friends and family, the businesses around you, the products and services you are interested in, and offers such like Boost, all in one place,” Dorsey said.

The end of Money by Afterpay comes shortly after Volt Bank, another challenging banking app, collapsed in late June when it failed to raise enough new money to continue.

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