The growth of digital payment methods is undoubtedly one of the driving forces behind the dizzying boom in trade over the past few decades, both locally and internationally. Few companies have been closer to the forefront of this advancement than Square. Let’s take a look at the Square business model to get a deeper understanding of how this amazing company operates.
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Square is a subsidiary of Block, Inc. (formerly Square, Inc.), the brainchild of Jack Dorsey (Twitter co-founder and former CEO) and Jim McKelvey (current Chair of the St. Louis Fed). The company is a financial services and digital payments firm, which was founded by the duo in 2009 and launched its first product in 2010.
They currently hold about 53% of the market share with a clientele base of over 2 million merchants. The company was initially formed in response to the difficulties encountered by customers and merchants when trying to make payments across different platforms and offered a more streamlined approach.
However, it has since expanded to include a host of other products and services, such as Square Payroll, Square Market, Square Capital, and so on. Through these subsidiaries, it has since gone from simply offering easy-to-use payment processing services to including inventory services, sales tracking, analytics software, financial services, general and administrative services, and much more.
Even though Block, Inc. was founded by Dorsey and McKelvey, it became a publicly-traded company in 2015. The largest shareholders include Jack Dorsey (12.7%), Morgan Stanley (6.8%), Vanguard Group Inc. (6.3%), T. Rowe Price (3.4%), and Jennison Associates (3.4%).
The Square mission statement states: “We believe that every individual must have an equal chance to build themselves in the economic world. We believe that the economy of any country and the world grows collectively when every citizen has access to the economic world. Therefore, we aim to make commerce easy for everyone”.
Their vision statement says: “We are here to assist businesses of all scales and sizes. We will help them to start, function, and then grow towards a better future in economies. And we do it because we believe that the growth of one business is the growth of every other business”.
Let’s take a closer look at some of the key income streams of Square below.
The platform charges a service fee or transaction fee on many of the services offered by its subsidiaries. For example, Square’s standard processing fee is 2.6% + 10¢ for contactless payments. Payments that are made via manually keyed-in transactions have a 3.5% + 15¢ fee.
Several Square subsidiaries and packages offer monthly subscription fees as well.
The company also sells a line of hardware products like the Square Stand, Square Card readers for NFC and EMV chip cards, barcode scanners, receipts printers, cash drawers, and so on. Square uses a blade and razor approach, which means that the hardware is usually sold at a loss or below market price, while profits are made through the revenue generated via the service fees of using Square services like Cash App, Square Debit Card, and so on.
Merchant Cash Advances (MCAs) are a form of non-traditional loans which offer guarantees on the “sale of future income”. This means that, in exchange for giving small businesses loans upfront, Square recoups a portion of this debt directly from digital payments made to the business.
Square also gains revenue through the sale of its various software and data tracking products, such as inventory software, data analytics programs, payroll software, and POS software.
The Square Business Model can be explained in the following business model canvas:
Square’s customer segments consist of:
It’s important to note that most of the companies that Square caters to are small and medium-sized businesses.
Square’s value propositions consist of:
Square offers both merchants and buyers smooth, affordable, easy, and quick financial transaction options. This is done primarily through a point-of-sale (POS) system that makes use of credit cards and computer tablets as payment registers. Square also provides the hardware required to facilitate such transactions as well. They also accept online payments through Square Market.
Square also provides financial services such as MCAs to small and medium-sized businesses, which can then be paid off over time via credit card deductions. They also offer Square Gift cards.
Square also offers a service known as Square Payroll, which helps business owners process employee payrolls much more efficiently. The firm also offers online booking services.
Square’s channels consist of:
Square’s customer relationships consist of:
Square’s revenue streams consist of:
Square’s key resources consist of:
Square’s key activities consist of:
Square’s key partners consist of:
Square’s cost structure consists of:
Here are some companies in the same field who can be viewed as Square’s closest competitors.
Below, there is a detailed swot analysis of Square business model.
Square is at the forefront of innovation in terms of streamlined payment services between buyers and sellers. In 2021, they reported a profit of US$ 657 million and a 60% increase in their profits from outside the U.S. market. With the digital payments segment estimated to reach $8.50 trillion in 2022 and $13.91 trillion by the end of 2026, Square is certainly well-positioned to capitalize on this growth.
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