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An Ambitious Square Sets Priorities to Reach Bigger Merchants And Expand Cash App’s User Base

In the face of an ongoing pandemic, Square Inc. late Thursday reported a record quarter for gross processing volume and made it plain its strategic priorities are to move upmarket to larger merchants and to expand the user base for its consumer product, Cash App.

Recent moves include Square Invoices Plus, launched in the second quarter and aimed at “larger, more complex businesses,” said Square chief executive Jack Dorsey during an afternoon call with equity analysts to discuss his company’s results. But other tactics also support the thrust toward bigger sellers, including Square’s August announcement of its deal to acquire the Australia-based buy now, pay later provider Afterpay Ltd.

That $29-billion investment, expected to close early next year, not only launches Square into the hot market for installment lending, it also brings into Square’s camp a bevy of big chains, including such names as Bed, Bath, & Beyond, Dillard’s, and Gap. “Afterpay has done very well with large retailers,” noted Dorsey during the call.

Dorsey: ““There’s a lot of potential in having the scale we have, but we can go much higher.

The migration to larger sellers has been evident among Square’s existing seller base for some time. Merchants with half a million dollars or more in annual processing volume accounted for 37% of Square’s total volume of $41.7 billion in the third quarter, up from 31% a year ago and from 28% in the same period in 2019.

On the consumer side of its business, Square’s other priority is growth in adoption and usage of Cash App, a digital wallet now open to teens with Square’s latest move, “with parental approval,” Dorsey stressed while touting the new feature, Cash App for Families.

Cash App for some time has supported Bitcoin trading and stock investments. To bring commerce to the wallet, Square in September launched Cash App Pay, which uses QR codes to let users make contactless transactions in stores. It’s not Square’s first effort to launch a mobile wallet. But, with more than 40 million active users of Cash App, the company is betting this product will be its most successful. “There’s a lot of potential in having the scale we have, but we can go much higher,” noted Dorsey.

With its Bitcoin capabilities, Cash App supports another priority Dorsey has set for Square. That, he told the analysts Thursday, is “helping Bitcoin become the native currency for the Internet.” To that end, he said, Square is also “focusing on building a hardware wallet.” A longtime Bitcoin enthusiast, Dorsey has said on previous earnings calls that Square is focused on the biggest digital currency and is not interested in supporting others. This may not be surprising in view of the $1.82 billion Square reported in Bitcoin revenue for the quarter, or 48% of all revenue.

For the quarter, Square reported $3.84 billion in total revenue, up 27% year-over-year. It’s the second successive quarter Square has exceeded $1 billion in transaction revenue alone, and represents a near doubling of that revenue since the third quarter of 2018.

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