A well-rounded Square takes another crack at consumer payments

Over the years, Square has evolved from a supplier of simple card readers to a provider of diverse omnichannel services. But the consumer market has always eluded it.

In 2011, Square debuted Card Case, which allowed consumers to store a credit or debit card with Square after using it at a Square merchant. The app, later rebranded as Pay with Square, eventually became the Square Wallet before disappearing from app stores in 2014 with the launch of Square Order, an order-ahead app that lasted just a year.

That left only Square Cash, a simple email-based P-to-P system that launched in 2013 with an accompanying app that did little more than help the user properly format emails to the service. Square Cash wasn't integrated with Square's merchant offerings, and to this day it remains Square's only consumer-facing product.

So it's no small feat that Square Cash has finally found the consumer audience that the mobile payments pioneer has craved for so long.

David Paul Morris/Bloomberg

"We are really excited about the uptick in how people are using Square Cash and that it has broken into the top 20 of apps in the U.S. in the Apple and Google stores," CEO Jack Dorsey said during a Wednesday earnings call. "We see Square Cash as a spending device, as its first critical need was sending money to another individual and then we added sending money to a business, or requesting money from a business."

Dorsey, who is also CEO of Twitter, sees a clear path for expansion of the Square Cash app and its accompanying stored-value card.

"We are seeing people use it as a prime spending device, which really excites us," Dorsey added. "The other thing is that we do now have something that is purely digital, which is a nice complement to our core business, which is hardware."

Nearly a decade after Square's 2009 debut, the company competes in a market that is far more internet-connected and far more complex. Hardware is no longer enough, as the company must make sure its merchants can compete in online and mobile channels as well.

"A big focus for us right now is omnichannel and we believe we are extremely well positioned to win here," Dorsey said. "We have seen sellers who are selling offline and want to sell online, and also those who are online who want to experiment with pop-up stores or physical locations."

There are few, if any, gaps in what Square can bring to the table in a payments ecosystem moving toward open platforms powering omnichannel services, e-commerce marketplaces, and easy money movement that helps merchants better manage their business, according to Dorsey.

Buoyed by a significant increase in third-quarter revenue, Square is also making a significant pivot to lure larger merchants through the launch of Square Register, a two-screened version of a countertop point of sale device — and an evolution of a product that was once a fancy shell for Apple's iPad.

"One of our strengths in addition to self-serve and speed, is our cohesiveness," Dorsey said. "You can come into Square through one channel, online or through Register, and you get a whole set of tools that serve your needs."

The company's Nov. 8 earnings report exceeded most investor expectations with a 45% jump in revenue at $257 million, while also noting a 31% increase in gross payment volume at $17.4 billion.

Square also cited progress with its lending program Square Capital, and made it clear that recent deals and investments with Eventbrite, BigCommerce and others illustrate how the company's open platform positions it to serve e-commerce marketplaces.

Behind the scenes of all of the merchant or consumer-facing products, Square continues to pursue its bank charter, a move that would help the company make faster decisions for investments in technology and product development, as well as for its Square Capital program. It may take another year before the charter application moves through its review channels, Dorsey said.

For the 2017 fiscal year, Square predicted adjusted revenue of as much as $966 million, up about $31 million from previous forecasts.

Square has no intention of resting on its laurels, and Dorsey predicts most competitors cannot match the various offerings of his company, nor its use of machine-learning for security and data analysis.

"We always see competitors go after one part of our equation, and we need to watch that," Dorsey said. "But our company's real strength is the comprehensiveness of our offerings and ecosystem. We are going to continue to apply the right technologies to our products."