Square should focus on growing its services

By August 3, 2018Bitcoin Business
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Square's gross payment volume (GPV) reached $21.4 billion in Q2 2018 , marking a 30% year-over-year (YoY) increase. That's a slight decline from the 32% annual GPV growth the firm saw between Q2 2016 and Q2 2017.

Square Subscription and Services-Based Revenue Business Insider Intelligence

And Square's overall GPV growth rate was down a bit from Q1 2018, when it grew 31% annually, but this marks a trend of slight sequential growth deceleration that the firm has been seeing over the past few quarters.

Despite that deceleration, Square's revenue grew 48% YoY to reach $815 million, which is considerably faster than the 26% YoY growth it saw in Q2 2017.

Continuing to ramp up initiatives in two main areas will likely enable Square to accelerate its growth. First, larger sellers: Square has been pushing into larger sellers, which has been working — this group, defined as retailers with over $125,000 in annualized GPV, now comprises half of Square's total GPV, up from 42% two years ago. That's likely because of Square's aggressive pursuit of key subsets of these sellers, like retailers and restaurants, which represent 85% of the firm's GPV.

New tools, like Square for Restaurants — its first product for full-service restaurants, which launched in May and features a point-of-sale (POS) system and restaurant management tools — are its most sophisticated and robust solutions yet, which could help it further attract, engage, and retain this client segment. More offerings like these, for subsets with a higher percentage of larger sellers, could boost Square's presence in this segment.

Second is subscription- and services-based revenue: This segment reached $134 million, up 127% annually — an acceleration from the 99% annual growth Square saw in Q2 2017. Square's performance here was boosted in part by Square Cash, it's peer-to-peer (P2P) offering.

In June 2018, the Cash App's Cash Card, or physical and virtual debit card, nearly tripled its spend from December 2017 to $250 million, showcasing notable engagement since launch. The firm is working to build the Cash App into a financial services ecosystem, pointing out new features like its rewards program, Cash Boost, as a way of generating more revenue for the segment — critical gains, since Square Cash hadn't been a major monetization force before. Meanwhile, Cash App's Bitcoin trading feature is generating small amounts of revenue as well.

And Instant Deposit, which gives users access to bank account cashout in real time, saw $4 billion in Q2, driven by both sellers and Cash App users. Building out this segment by identifying popular offerings to supplement its main products can allow Square to continue seeing strong revenue growth. Added features, like coupons and Bitcoin trading, can boost engagement among existing customers and act as effective onboarding tools that might drive new users to Square's more lucrative offerings.

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