Payment card transactions create quite a bit of data that is valuable for purposes beyond a sales order. As the following article from The Motley Fool reports, Square is doing just that as they evolve into more than just a payments company.
Square isn’t just a payments company. And it’s not just a broader merchant services company. Square is a data company.
Square has data on how consumers spend their money at a wide variety of retailers. It has data on how retailers order inventory. It has data on how merchants pay their employees, and how those employees spend that money. It has data on when stores are busy and when they’re not. It has data on what questions its customers need answers too. And much, much more.
Square currently uses its data for a few things around its core merchant services:
- Risk management and fraud detection
- Machine-assisted customer support
- Assessing risk for Square Capital loans
- Cross-selling Square’s other services to existing customers
- Finding new merchants to target with direct marketing
Square’s data is an essential tool to running its business efficiently. Square’s data could also be used to assist with developing new products. But none of this really makes it a data company; it’s really just a merchant services company that uses its data effectively.
What makes Square a data company is that it’s focused on building profiles of its customers — both merchants and consumers. In a February interview, Square CFO Sarah Friar noted that the most exciting thing about the rapid growth of Square’s Cash App is “this new look into a consumer’s profile.” Cash App is a peer-to-peer payments service that Square added several new features to last year, including a prepaid debit card and the ability to buy bitcoin. Despite 7 million users, Square doesn’t produce much revenue from the app.
Square developed a large base of small and micro merchants who needed a way to accept credit card payments. Along the way, Square discovered that merchants need more services such as business management tools and working capital as well. Square has been diversifying and creating other revenue streams to differentiate itself beyond just handling payment transactions. Their strategy is working and they are positioned for stronger growth if they can execute to plan.
Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group
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