Afterpay buying Pagantis to challenge Klarna in southern Europe

Afterpay has entered into an agreement with NBQ Corporate SLU to acquire Pagantis SAU and PMT Technology SLU for €50 million (about $59 million) to expand into France, Italy and Spain — a direct challenge to Klarna, one of the dominant European buy now, pay later (BNPL) providers.

In consideration for the acquisition, NBQ will receive €5 million (about $6 million) in cash payable at the completion of the acquisition, and a deferred compensation of a minimum of €45 million (about $53 million), payable three years after the completion of the agreement. The deferred compensation can exceed the agreed upon amount if the value of the acquired entity has risen above the €45 million target. Pagantis' founder and CEO, Rolf Cederström, will continue to lead the Pagantis team. The deal is subject to regulatory approval.

"Our momentum to date has given us the confidence to expedite our expansion into new global regions,” said Anthony Eisen, cofounder and CEO of Afterpay, in the press release. “Entering into such internationally relevant markets like the U.S. and the U.K., and seeing our growth outpace what we experienced in our more mature Australian market, validates the appeal of our product on a global scale. Acquiring Pagantis provides us with the necessary regulatory licensing, resourcing and infrastructure to expedite the launch of Afterpay into key countries in Southern Europe and beyond."

The move puts Afterpay in direct conflict with several European BNPL competitors, including the dominant service offered by Klarna. Most recently, Klarna has been eyeing a U.S. IPO with the company being valued at $5.5 billion, making it one of Europe’s most valuable fintechs. While Klarna originally started by offering installment loans for point-of-sale purchases (something Afterpay does not do), it has expanded its BNPL services to include a short-term deferred payment option — directly competing with Afterpay’s core product line.

Klarna offers customers in multiple countries to make a purchase that can be paid off in four installments that are charged every two weeks to either a debit or credit card at no cost. Afterpay’s product also splits purchases into four installments as well, with no interest or fees and can be charged to either a debit or credit card. However, Afterpay stated that 89% of its U.S. customers have the installments charged to their debit card. Both companies charge a late fee if they are unable to collect a payment.

Barcelona-based Pagantis currently offers buy now, pay later services to European e-commerce merchants; however, as part of the acquisition, the existing credit products will be discontinued and replaced by Afterpay solutions. In Europe, Afterpay operates under the Clearpay brand, which was part of a 2018 acquisition of ClearPay Finance Ltd.

There is a Dutch company currently operating in Europe with a BNPL service called AfterPay that has no relation to the Brisbane, Australia company Afterpay Touch Group that operates in the U.S., Australia and New Zealand under the Afterpay brand.

Afterpay claims that the BNPL market in Southern Europe has an addressable e-commerce value which exceeds €150 billion (about $177 billion) across Spain, France and Italy. The company says that a large millennial population and a preference for debit cards favors its deferred payment BNPL solution. Afterpay also says the acquisition will allow it to expand its BNPL service to its global retail customers that operate in those countries.

Afterpay has experienced tremendous growth in BNPL active customers in the last year in both the U.S. and U.K. markets. Afterpay entered the U.S. market in 2018 and the U.K. in the summer of 2019.