Square is not just for mobile POS payments anymore. Like other payments providers, Square has seen its merchant transaction business decline due to COVID-19. Fortunately, the company has been diversifying into business and consumer banking products, and this is beginning to pay off. Lending, deposit accounts, and person-to-person payments will be areas of growth for them. Just as well for now, as POS payment transactions do not show signs of a quick recovery to pre-pandemic days.
The following Motley Fool article reports more on the topic:
More and more Cash App users are relying on Square‘s app for their banking needs. Direct deposit accounts surged in April after Square made efforts to make the feature more available to users ahead of tax refund season. By mid-April, 14 million Cash App users were eligible to receive direct deposits.
The CARES Act stimulus provided an even bigger boost to Square’s latest Cash App focus. Direct deposit volume tripled in April compared to March. Management notes direct deposit customers remain a small portion of the Cash App’s overall network, but recent adoption is encouraging.
Direct deposit accounts and volume are key metrics for Square investors to follow, says SunTrust analyst Andrew Jeffrey. He sees Cash App taking a 20% deposit share as it competes with traditional banks.
Growing direct deposit accounts on the Cash App open the door for more services, and the company already sees a positive correlation between users who set up direct deposits and revenue. “Direct deposit customers have generated revenue which is multiples higher compared to customers who only use peer-to-peer,” CFO Amrita Ahuja said during Square’s first quarter earnings call in May.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group
