Square, which built its business on the simplicity of its plug-in payment device, is piling on services that should make banks and other companies take notice.

"We got started with payments processing. That's one part of the puzzle, but there's a whole ecosystem with merchants," says Faryl Ury, a Square spokesperson.

Square's latest play is Square Capital, a program in which Square's extends capital to its merchant clients based on each client's transaction history with Square. Square is positioning Square Capital as alternative to bank loans, and contends it can use its existing relationships with businesses to offer fast access to capital with a simple repayment plan.

"It may take up to a year to apply at a traditional bank, you have to put together all sorts of paperwork, and even then you may not get the money. With us you know what you can get right away," Ury says, adding Square is not working with a bank partner.

Square's Capital does not have an application process, and the repayments to Square are automated. The terms vary for each merchant, and Square says provides the example of a merchant borrowing $10,000 and paying back $11,000 over time in payments of 10% of each day's Square transactions. "The merchants see it as a cost of $1,000 to get $10,000 to expand," Ury says.

The broad release of Square Capital follows a successful pilot, Ury says, noting that a survey of 1,000 Square Capital users, 85% said they are "extremely likely" to recommend the product.

"It should be a wake-up call for banks. They have to get into mobile, and on both sides [consumer and merchant]," says Richard Crone, a payments consultant, who says small-business lending is the mainstay offering of community banks, typically accounting for more than half of the profit for a community or regional bank, Crone says. "What Square is doing is end to end."

Square is entering a small-business lending market that's already crowded. PayPal's Working Capital program is similar to Square capital in that it allows merchants to pay back loans based on their sales volume. Other small business lenders include Fundbox, Kabbage, OnDeck, SmartBiz, and peer-to-peer lenders such as Dealstruck and Lending Club.

Square is able to extend credit easier because it already has the information it needs to run the program, Ury says.

"We're in a unique position. We have this understanding of merchants and see the money coming in when they take payments," Ury says. "We don't have to ask them stuff like their bank account, because we already know that."

Since most payment processors do not have lending core competencies and the corresponding risk management teams or capital, they rely on third parties and referrals to offer capital, which puts Square in a good position, says Rick Oglesby, a senior analyst and consultant at Double Diamond Payments Research.

"Because Square has end-to-end control over their technology and because they already have a big footprint in merchants that make good prospects for this service, they can embed the solution right into their payments process in a seamless way that is difficult for the average [independent sales organization] or acquirer to match," Oglesby says.

Banks could also offer fast small-business credit, but it would be a challenge, Oglesby says.

"A lot of this lending is considered to be 'high risk' so many banks would stay out of it," he says. "Also, in order to be fully integrated with the acquiring relationship, the bank would need to be the merchant's acquirer to offer this type of solution."

While banks and other third parties target Square customers for loans, only Square can eliminate the need for an application process and simply make the credit available on a pre-approved, click-to-accept basis, Oglesby says.

"Banks don't have the infrastructure, even banks that resell Roam and other mobile platforms aren't doing the processing on a daily basis," Crone says, adding Square's history-based risk model also works well for the company. "This provides a strong incentive to use Square."

Square Capital is the latest in a series of moves that Square has made to expand merchant services, and monetize its relationships beyond its core 2.75% transaction fee. Its Square Feedback product, an interactive digital receipt, costs $10 a month. An order-ahead service called Square Pickup, which launched last month, charges an 8% fee.

"It's interesting to note that Square has gradually been adding products with non-transactional revenue streams to its portfolio," says Jordan McKee, a senior analyst at Yankee Group. "The revenue dynamics behind Square Feedback and Square Capital are relatively different from the vendor's traditional approach of taking a fraction of each purchase. It would not be surprising to see Square pursue similar tactics with future products in an effort to obtain more sustainable and predictable revenue streams."

Square's recent moves also signal a maturation of its business, McKee says. "The vendor has begun to hone its focus on profitable offerings that are more aligned with its core business. Square Capital is another example of this, and it makes a tremendous amount of sense given the trove of transaction data that Square sits on," he says.