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The expansion of its software and services business could diversify Square's business enough to help it maintain its growth. The company said in an S-1 filing ahead of its IPO in November that it was not yet profitable, but that could be attributed to the company's youth. But the software and services businesses could help generate revenue for the company and foster loyalty with merchants.
Here are some key takeaways from the report:
In full, the report:
Fresh off its immensely successful first quarter as a public company, Square is looking to expand beyond its core business.
Square Invoices, the company's digital invoicing platform, has collected 100,000 active sellers in approximately 18 months. Software like this could keep Square competitive as invoicing firms such as FreshBooks push into the mPOS market.
Merchant borrowers are using this capital for long-term investments such as equipment, which indicates that Square could benefit if it were to attract and renew clients to solidify this revenue stream, notes Jaime Toplin, research associate for BI Intelligence, Business Insider's premium research service.
Square is putting a lot of effort into Square Capital, which generated more than $400 million in loans through more than 70,000 advances in 2015. It's noteworthy that 38% of those came in the fourth quarter.
Mobile point-of-sale (mPOS) has been Square's bread and butter, but the company announced in its first earnings call that it plans to create a strong software and client services division to complement its main business.
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Square's growth will be a topic to watch in the coming months, as the company is one piece of the way consumers' payment habits are changing. Mobile payments are becoming more common thanks to companies like Square, but that's just the beginning.
Square is also growing Square Instant Deposit, which allows merchants to transfer funds from sales immediately into their bank accounts for a 1% fee. This program has attracted more than 58,000 users since it debuted in August and has processed more than 600,000 deposits. The draw here is in the speed, as these types of transactions typically take three to five business days.
Evan Bakker and John Heggestuen, analysts at BI Intelligence, have compiled a detailed report on the payments ecosystem that drills into the industry to explain how a broad range of transactions are processed, including prepaid and store cards, as well as revealing which types of companies are in the best and worst position to capitalize on the latest industry trends.
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