SYDNEY, AAP – Afterpay’s $39 billion merger with US payments giant Square has shored up the Aussie vendor’s defence against Apple and PayPal, and the possibility of tougher regulation.

The deal revealed on Monday will see Square acquire all Afterpay shares in return for stock of the former on the New York Stock Exchange.

The US payment terminals provider’s main product looks like a small, white square on a shop counter.

The company will use Afterpay in its existing software to let businesses offer instalment payments at checkouts.

Tech giants such as Apple and PayPal recently moved to offer buy now, pay later services due to their growing popularity.

They pose tough competition to Afterpay and other providers in a crowded market.

The Square acquisition will also bolster the company against the threat of regulation.

Regulators in Australia and abroad are yet to tighten rules on what many say is another form of credit which consumers can easily fall victim to.

Swinburne University of Technology Professor Steve Worthington said these providers did not have to conduct credit checks like credit card providers did, but this could change.

“As this area becomes more successful, it will attract more attention from regulators,” he said.

“If regulators choose to change the definition of credit, you have a whole new raft of regulations that could cause a lot of these players problems.”

Groups such as Financial Counselling Australia claim many consumers have incurred substantial debt using these services.

Prof Worthington also said regulators may later allow businesses offering buy now, pay later services to apply a surcharge.

Afterpay and the like currently collect most of their revenue by charging businesses a fee for each sale made using their service.

Prof Worthington said businesses may eventually want to pass this charge to the consumer, in the same way as they do with some debit card payments.

The Australian Shareholders’ Association’s Afterpay monitor Christine Haydon said the deal appeared a good one for investors.

While Afterpay shareholders will receive Square stock rather than cash, Ms Haydon liked the possibilities.

“Growth in the US share market is all about tech stocks,” Ms Haydon, who is not an Afterpay shareholder, said.

“So you’re getting into a lot bigger market. There is a lot of upside.”

Under the deal, shareholders will get 0.375 Square shares for each Afterpay share held.

Based on Square’s US closing price of $US247.26 per share on July 30, Afterpay shares have an implied value of $126.21 each – a premium of about 30 per cent to Friday’s close.

The deal is expected to be completed in the first quarter of calendar 2022, pending court approval of a scheme of arrangement.

Afterpay’s co-founders and co-CEOs – Anthony Eisen and Nick Molnar – will join Square once the deal is sealed.

Afterpay also outlined full-year sales figures, which showed a 90 per cent increase in sales to $21.1 billion.

The biggest improvement came in the UK and Europe (227 per cent) where the company trades as Clearpay.

The company also claimed the number of customers around the world using its service improved by 63 per cent to 16.2 million.

The number of businesses improved by 77 per cent to 98,200.

Afterpay shares closed up 18.77 per cent to $114.80.