0:00

Welcome to Fear and Greed Sunday Feature. I'm

0:02

Michael Thompson. One of the biggest and certainly

0:05

most remarkable stories that we saw this week

0:07

was about BHP's $60 billion

0:09

bid for mining giant Anglo-American. Now

0:11

this thing is huge, but it

0:13

also got me thinking about some

0:15

of the other big deals that

0:17

we've seen. And one of the

0:19

biggest was Block's purchase of Australian

0:21

Buy Now Pay Later operator afterpay

0:23

for $39 billion. The deal

0:26

was announced back on August the

0:29

2nd, 2021. And just two weeks later,

0:31

we recorded and published this interview

0:33

with Anthony Eisen, one of the

0:36

co-founders and co-CEOs of Afterpay about

0:38

what was at the time still

0:40

a proposed sale. Of

0:42

course, it ended up going through a few

0:44

months later, making Anthony and his co-founder Nick

0:47

Molnar a fortune, securing their place in the

0:49

list of Australia's biggest deals just in time

0:51

too, before the Buy Now Pay Later sector

0:53

ran into all kinds of trouble. It is

0:56

a great interview by Sean Aylmer. I hope

0:58

you enjoy it. Welcome

1:04

to the Fear and Greed daily interview.

1:06

I'm Sean Aylmer. Australian success stories and

1:09

corporate deals don't come much bigger than

1:11

this. In the last few years, Afterpay

1:13

has defined the Buy Now Pay Later

1:16

space, changing the way many consumers purchase

1:18

products. Anthony Eisen and Nick Molnar

1:20

founded the business in 2014. Afterpay listed on

1:22

the ASX in 2016 at an issue price of just

1:27

$1 a share. In February this

1:29

year, it hit a remarkable $160 per

1:31

share. It settled back to just north

1:34

of $100, but then along came

1:36

US giant Square. The company

1:39

founded by Twitter's Jack Dorsey agreed

1:41

to buy Afterpay for $39 billion,

1:43

the biggest deal in Australian corporate

1:45

history. Of course, it's not

1:47

the only Buy Now Pay Later company.

1:49

There are global giants like Klarna and

1:51

Affirm, local competitors including Zipco, and then

1:53

the likes of Apple Pay and PayPal,

1:55

also entering the space. But

1:57

Afterpay keeps innovating. In October,

1:59

launching Afterpay money, while others are shifting

2:02

to the buy now pay later space, it

2:04

looks like Afterpay is moving into more traditional

2:06

banking products. Anthony Eisen is

2:08

the co-founder and co-CEO of Afterpay and

2:11

my guest today. Anthony, welcome

2:13

to Fear and Greed. Thanks

2:15

very much for having me. So two weeks

2:17

on, you've just sold the business for $39 billion.

2:20

How does it feel? Look, we're really

2:22

excited about the proposition of working

2:24

with Square. We think they're an

2:27

incredible global company driven by

2:29

leaders that are incredible in

2:31

their own right. From

2:34

Nick Molnar and my perspective, the

2:36

alignment of vision and

2:38

passion and just founding principles

2:40

was so on point

2:42

when we met and discussed things obviously

2:44

in a lot of detail. We

2:47

think that it's hugely complimentary

2:49

and gives us a springboard

2:51

really just to keep developing

2:54

a unique value proposition globally

2:56

in an accelerated way. So

2:59

we're hugely excited about the proposition.

3:01

I think you've just answered this question. It

3:03

was why you did it, but it is to actually

3:06

take the next leap up. Is that right? Yeah.

3:09

When you look at where we've come

3:12

from, it was really focusing on

3:14

trying to introduce a new trust

3:17

equation to consumers. Where

3:20

Afterpay innovated originally

3:22

was bringing together the

3:24

environments of commerce, payments and finance

3:27

in a new way. But at

3:29

the centre of that, it was

3:31

about trusting the consumer.

3:35

We were fortunate enough to illustrate

3:38

our value proposition at a

3:40

time where that consumer trust

3:42

equation was very largely lost.

3:47

When we first introduced a new way

3:49

of doing things, we

3:51

saw the customer response

3:53

to be hugely significant

3:56

and self-perpetuating. That's

3:58

really gained speed over the last. few

4:00

years, not only in terms of how

4:02

we've developed in Australia but very much

4:05

so in the US and

4:07

globally. You know, it is

4:09

about continuing with that evolution. Afterpay

4:12

was never merely a transaction engine

4:14

to process payments, it was about

4:17

how did you introduce a new

4:19

way for consumers to

4:21

be treated very fairly and to

4:24

create a win-win environment between consumers

4:26

and merchants. That gives rise to

4:29

a whole lot of evolution opportunities.

4:31

So yes, very much so we

4:33

see it as an acceleration of

4:35

that pathway. Okay, who actually came

4:37

up with the idea? Well of

4:40

course me because it was a really good idea.

4:42

Of course, I'm talking to you. You

4:45

know, there was so much inspiration came

4:47

from when I met Nick Molnar who

4:50

was my neighbour across the

4:52

road. Nick was an incredibly

4:55

savvy internet commerce person,

4:57

you know, while he was

5:00

in university. Nick toyed around with

5:02

a whole lot of different ideas when he

5:04

was trying to come into the workforce and

5:07

I was fortunate enough to be friendly with

5:09

him, you know, straight off the

5:11

bat. Again just serendipitously being neighbours

5:13

across the road but he was

5:16

incredible. We just talked about a

5:18

whole lot of different business models.

5:21

He saw installments being used in

5:23

a very crude and rudimentary way

5:25

in the jewellery industry which is

5:27

where he originally came from. So

5:30

he thought that that would be

5:32

a really incredible opportunity for the

5:35

next generation, his generation, to use

5:37

installments in a way that, you know, turned

5:40

a traditional industry model on its

5:42

head and we really

5:44

just evolved after pay together from

5:46

that initial discussion. So it really

5:48

came about Nick looking at a

5:50

whole lot of different models starting

5:53

originally from, you know, what he

5:55

was doing in his bedroom which

5:57

was selling jewellery on eBay. being

6:00

modest there Anthony because one of the things

6:02

amazing about this story is that you

6:05

lived in the right street, you got together, it started

6:07

in 2014 and seven years later you've done

6:10

what you've done. Could you

6:12

ever have imagined that trajectory? No,

6:15

I don't think you can really

6:18

imagine it is really the truthful answer.

6:20

The huge privilege that comes with our

6:22

journey is for, you know, I'm quite

6:25

a bit older than Nick but it

6:27

was the first time in my career

6:29

where we tried to launch

6:31

something without actually working out all

6:33

the business model characteristics in advance.

6:36

It was really about, you

6:38

know, wanting to introduce something

6:40

that turned a traditional model

6:42

that was broken on its

6:44

head and, you know, when

6:47

you have that type of motivation, it

6:49

allows for not only just great

6:52

collaboration but a whole spirit of

6:54

really talented people even though at

6:56

the start it was a very

6:58

small handful to come together with

7:01

a passion. You know, why our team

7:03

woke up every morning and just worked

7:05

their guts out for a place on,

7:08

you know, well before it was the

7:10

world stage but just a right to

7:12

exist in Australia was from

7:14

that passion and motivation. So, you

7:17

know, that probably is what stands out to

7:19

me more than everything else and when you

7:21

see consumers react positively

7:24

to something new that's

7:26

generating a win-win equation,

7:28

it's hugely stimulating. So,

7:31

it was really step-by-step to be

7:33

honest with you but it's incredible

7:35

when you see a drip turn

7:37

into a flood and you know

7:39

you're onto something because you're having

7:41

that consumer impact. No doubt

7:43

you had a vision and you had

7:45

people working incredibly hard but probably the

7:47

difference with Afterpay, it actually had a

7:50

product that people really, really wanted. More

7:52

than most other products that are produced

7:54

or manufactured, when did you suddenly

7:56

realise you think, oh, we are onto

7:58

something here? What was that point? Use

8:00

How is pretty pretty early in the

8:03

pace actually because you can imagine when

8:05

you come up with a new concept

8:07

and you go to a retailer and

8:09

say look this is what we've got

8:11

in mind. We thing can seem as

8:13

have never had the right relationship with

8:16

point of Sale finance before. We want

8:18

to turn that completely on it's head.

8:20

We want to protect consumers. In the

8:22

meantime we don't want them to pay

8:24

anything extra. By the way you're gonna

8:26

pious of say instead of the seem

8:29

of that's gonna. Work really well for

8:31

you because you know if you abide

8:33

by these principles of trust and service

8:35

as opposed to selling a product they

8:37

gonna really love for it. And they're

8:39

They're gonna come back again and again

8:41

and you'll sell more in your brand

8:43

will be better off for it. And

8:45

I used to say will make an

8:47

Anthony that sounds terrific but we don't

8:49

believe you. So as you do right

8:51

at the start is I will look,

8:53

let's forget about the contract let's install

8:56

of. If it doesn't work guys, just

8:58

turn it off yet. You know that.

9:00

Was literally the way that we

9:02

approached of at the start. What?

9:04

Was fabulous was you know a few

9:06

smaller retailers of the time that have

9:08

become big business as one of which

9:11

is called Princess Poly which is run

9:13

by some incredible paypal. Really? Just

9:15

gave us ago and we saw the

9:17

consumer reaction pretty much straight away. I

9:19

said to nyc we need to do

9:22

you know five transactions and I just

9:24

her I am test out service and

9:26

save see where it gets to you

9:28

know that turned into two hundred and

9:30

a day very quickly and we could

9:32

say the way the table were just

9:35

sign. Like. What's the catch

9:37

here? You know what are we

9:39

missing and it really spread quite

9:41

quickly. In fact, we got to

9:43

about two million customers in Australia

9:45

without doing really any. Above.

9:48

The line advertising whatsoever laugh.

9:50

So it was that a

9:52

major impact that consumers at

9:54

the start saw something that

9:56

was very different and that

9:58

that helped dust spread. Quite

10:00

quickly. Of course we are only as

10:02

good as our performance without merchant partners

10:04

as well who saw the impact quite

10:06

quickly to. But I must have come

10:08

talk. remember saying the After Pay emblem

10:10

suddenly appearing in my local shopping center

10:12

a few years ago and I had

10:15

never heard of After Pie at the

10:17

time. It seems that merchants once I

10:19

started to adopted. A. lot of and started

10:21

to adopt it. Yeah. I mean,

10:23

it's one of those things where

10:25

success I think breed success and

10:28

and lots of merchants in a

10:30

lot of ways follow each other

10:33

in a very competitive but still

10:35

small world. When you talk about

10:37

retail, you know. the thing that

10:40

was really powerful for us in

10:42

our conversations in the hallway them

10:44

we built our company is that

10:47

we didn't come from finance. We

10:49

didn't come from payments. We came

10:51

from commerce. And understanding the

10:54

well we'll building with a platform

10:56

that connected. Merchants.

10:58

With the next generation of consumer,

11:00

we weren't trying to sell, just

11:02

a little check out button at

11:05

the end for a finance option.

11:07

What we were talking to merchants

11:09

about was how to connect better

11:11

with customers and health through our

11:14

platform. It was more than the

11:16

sale and it was about new

11:18

customers returning customers brand loyalty. Brand.

11:21

Exposure. So as we try to

11:23

prove that out, It

11:25

became a very different proposition to

11:27

just saying. Well, You. Know after

11:30

pies? another. Transaction. Option

11:32

as we talked to Merchants today.

11:35

They. Don't compare us to credit

11:37

cards or that. Form. Of

11:39

check out What they're saying is how

11:41

many new customers. How. Much more

11:43

exposure is off to pay giving

11:46

me compared to say like a

11:48

Google or Facebook. there are other

11:50

ways that they connect with customers.

11:52

Stay. With me Anthony will be back in a minute.

12:00

The Morning is Anthony Eyes and Co. Found

12:02

that and Co Ceo of After Pay. The.

12:04

Thing about success is it it breeds competitors

12:06

and selling Australia there's been a number of

12:09

competitors are even if they're operating in the

12:11

Us, assume and seem to be listed in

12:13

Australia. You've got that the new about the

12:15

apple pies and pay pal's moving into your

12:18

spice. What set environment going to be like

12:20

going forward. Yeah. I mean,

12:22

look, competition who decide has been

12:24

a benefactor of Live from the

12:27

very beginning in a lot of

12:29

ways. It's actually reinforce the significance

12:31

of the sector which we view

12:33

as a good thing because you

12:36

can say quite plainly over the

12:38

last three or four years. just

12:40

the small thing that we started

12:42

here in a Stranger is now.

12:45

Become. Very globally recognized. You

12:47

know, from our perspective we've

12:49

always live with competition, but

12:52

it's also inspired. The. Development

12:54

of what with proven to

12:56

be unique value proposition so

12:58

more than a transaction engine

13:00

up platform that's truly two

13:03

sided. They. Can x

13:05

consumers. With. Merchants is

13:07

where we see. Our

13:09

differentiation and now competitive advantage.

13:12

Very few of the players

13:14

that you've mentioned actually do

13:16

have a true two sided

13:18

network he doesn't Main competition

13:21

isn't there and you know

13:23

you respected and you a

13:25

all with it yourself. But

13:27

it's about developing this two

13:29

sided platform and not coming

13:32

from payments, not coming from

13:34

finance which has always been

13:36

our advantage. So we feel

13:38

that while. Competition will obviously

13:40

get more intense. It will

13:43

bring significant recognition to the

13:45

sector, but it also allows

13:47

us to keep illustrating out

13:49

differentiation from where with come

13:51

from. Again, we think that

13:54

this very good Skype to

13:56

develop our growth. From. here

13:58

you know by now pay Later is

14:00

a very general term that's been

14:02

used more often than not in

14:04

the media over the last couple

14:06

of years, but it still represents

14:08

a very small percentage of the

14:10

total payments universe. So we're

14:13

still right at the beginning of what the

14:15

opportunity represents. I know we're running out

14:17

of time. Just a couple of quick things. On that

14:19

last point, it is only a small

14:21

part of the payments universe, but it certainly has

14:23

got the attention of politicians and now some

14:25

of the big bank CEOs. Is regulation a risk

14:28

for the sector? Look,

14:30

regulation has always been something

14:32

that's been very important and it's been

14:34

a developing topic for us over the

14:37

last few years. Regulation

14:39

is really important and we've

14:41

always been advocates for that.

14:44

The key thing about afterpay,

14:46

but also a whole lot

14:48

of new digital and technology

14:50

innovative businesses that have

14:52

sprung up over the last five

14:55

years, is that they're not exactly

14:57

the same as the traditional incumbent

14:59

players. And in a lot of

15:01

cases, technology gives the opportunity for

15:04

businesses to transcend across a whole

15:06

lot of different models. Regulation

15:09

should always protect the consumer,

15:11

but what's very critical is

15:13

that regulation does adapt with

15:15

new models that are appearing

15:17

in the economy if they're benefiting for

15:20

consumers. So it's really about trying to

15:22

develop fit for purpose regulation as opposed

15:24

to not having it. It's

15:27

really important, but it's important that it also

15:29

evolves and it's appropriate. And just

15:31

quickly afterpay money, you did a deal with Westpac.

15:33

It looked to me from outside like you

15:35

were sort of moving more into traditional banking services.

15:38

I'm not sure how the square deal fits into

15:40

all that, but what was it just in your

15:42

thinking in terms of actually moving, as I saw

15:44

it, more into traditional sort of credit services? Yeah.

15:47

Well, the key thing we established with

15:49

afterpay was this equation called

15:52

trust, the consumer, which I said

15:54

was broken before. We spent Thousands

15:57

of hours speaking to our consumers.

15:59

or we've heard very clearly that

16:01

united I feel let down by

16:03

the arrangements of the past. We.

16:06

Think we can evolve our ecosystem

16:08

to include things that are really

16:10

important like how you save and

16:12

I you budget and packaging that

16:14

and delivering it in a very

16:16

fair. Transparent. And modern

16:19

wiser consumers like they have

16:21

not experienced in the past

16:23

so it's full steam ahead.

16:25

All had soft soap Westpac

16:27

who. From. Our perspective have

16:29

really seen what is possible when

16:31

you evolve your business model so

16:34

the collaboration with them has been.

16:36

Fabulous. And were excited to,

16:39

you know, launch our service imminently

16:41

now Tiber in fact, and we

16:43

think it. Can. Create a

16:45

whole new opportunity for consumers and

16:48

were excited to show what we

16:50

can do! If costs us

16:52

it of us isn't very quick one jobs have

16:54

a need, any kind of the companies taken either

16:56

and our good pretty decent workforce. Now what happens

16:58

to all those people her working after by now.

17:01

Year. The key thing about in

17:03

our discussions with Square was was

17:05

how do we take my main

17:08

to matter. We build on what

17:10

we've got. If you look at

17:12

the combination of our businesses, it's

17:15

not replacement, it's. Edition.

17:17

And what's also fabulous from

17:19

our perspective is the investment

17:21

and continued investment opportunity in

17:23

Australia. You know squares biggest

17:25

market outside North America is

17:27

in fact a stranger. so

17:29

we employ hundreds of people

17:31

here on intend to employ

17:33

hundreds more, so in combination

17:35

we think our investment in

17:37

stride. You're in Australia. Take

17:39

our community here will be

17:41

stronger with a combination and

17:43

we're excited to deliver on

17:46

that promise. plants. and good luck if

17:48

so few hurdles to jump before that deal is

17:50

consummated that ass but good luck with all that

17:52

and congratulations on what you've done with have to

17:54

pay in creating the how the sector and competition

17:57

the market which had been a day is good

17:59

the country Thank you for

18:01

having me, really appreciate it. That

18:03

was Anthony Ison, co-founder and co-CEO of

18:06

Afterpay. This is the Fearing Greed

18:08

Daily Interview. Join me every morning for the full

18:10

Fearing Greed podcast with all the business news you

18:12

need to know. I'm Sean Elmer.