Square, Inc.: What It Is, How It Works, Products and Services

In 2009, entrepreneurs Jack Dorsey and Jim McKelvey created Square, Inc. (SQ), fulfilling their dream of creating technology capable of aggregating merchant services and mobile payments into a single, easy-to-use service. Less than a decade later, millions of small businesses use Square to accept credit card payments, track sales and inventory, and obtain financing.

In December 2021, Square, Inc. changed its name to Block, Inc. to account for the exponential growth the company has experienced since its inception and the new territories it hopes to enter. Block's product line includes Cash App, which allows users to send and receive money for free through a mobile application; Square Point-of-Sale, a free application that lets merchants process payments via smartphone; and TIDAL—a subscription-based streaming service.

Key Takeaways

  • Jim McKelvey and Jack Dorsey launched Square, Inc., a merchant-services and mobile-payment platform, in 2009.
  • Square Inc. changed its name to Block, Inc in December 2021 to account for its growth and increased portfolio of companies.
  • Starting in 2017, the company's Cash App began allowing merchants to use bitcoin in the technology.
  • Square Point of Sale (POS) allows merchants to accept payments securely, manage inventory and customer profiles, generate sales reports, and more.
  • Square's stock price grew more than 2844% within six years of its IPO.

How Square Grew Its Financials

Square received seven rounds of private funding before going public in November 2015. Major investors included Acequia Capital, Sequoia Capital, and Khosla Partners. On Nov. 19, 2015, Square's shares began trading on the New York Stock Exchange for $9 per share, with a company valuation of around $3 billion. By April 15, 2021, Square traded at $265 a share.

In November 2017, the Cash App announced a trial program that availed bitcoin trading to certain users. Then in March 2018, the company extended its bitcoin trading services to Wyoming, pushing the stock to all-time highs at the time.

On April 26, 2018, Square announced its acquisition of San Francisco-based Weebly, a website construction service and web hosting service company. It acquired food delivery service Caviar in August 2014.

Square then became the first company to own both a food delivery company and a point-of-sale service, after launching Square for Restaurants in May 2018. Caviar was later sold to DoorDash in 2019 for $410 million.

What Products and Services Does Square Offer?

Square provides merchants with a suite of services and products to help fulfill sales transactions, employ marketing tactics, and manage inventory, staff, and finances.

For its traditional payment services, Square charges merchants 2.60% of the sales price plus 10 cents of any transaction they process via swipe, insert, or tap, and it charges 3.5% plus 15 cents for every manually keyed-in transaction. Money from merchants' transactions is typically deposited into their bank accounts within two business days.

Square offers Square Analytics, a free set of tools that analyzes sales and customer data and creates trend and insight reports. Square Analytics can be applied on top of its POS products. The company also offers Square Appointments, an online service that lets users book appointments.

To prevent fraud and identity theft, Square introduced encryption technology on its devices, which do not store card numbers, security codes, or magnetic stripe data.

Square Stand, one of the company's few physical products, lets users turn an iPad into a complete point-of-sale tool. The company has also expanded into financing small businesses, with products like Square Capital, which provides cash advances to merchants, without locking them into payback schedules. The firm also provides complete payroll services to businesses in all 50 states, with Square Payroll.

Square Point of Sale (POS)

Square POS lets customers pay, tip, and sign on a merchant's mobile phone or tablet and lets merchants process payments made with credit cards, gift cards, and cash. Square POS is often used with Square Reader, a small device installed on smartphones or tablets that reads credit and debit cards.

Business owners can also use the POS app to send and track invoices, customize products, email receipts, apply discounts, administer refunds, access real-time sales data, and track inventory in real-time. Users can access this information and engage in these activities by logging onto the app's dashboard.

Squares's Corporate Profile

Square Inc., now Block Inc., has acquired a multitude of companies, including TIDAL, Afterpay, and Cash App. Some of the company's major competitors include Google Wallet (GOOGL), Intuit Inc. (INTU), and PayPal-owned (PYPL) Venmo.

For 2021, the company recorded total revenues of $17.66 billion, an 8.2% increase from the prior year and an 86% increase from 2020. Bitcoin transactions accounted for 57% of revenues. As of March 18, 2022, Square's market cap was $81.58 billion.

$1.96 billion

Square's Bitcoin revenue generated in the fourth quarter of 2021.

Block now has offices in several countries, including the United States, Canada, Australia, Ireland, and Japan. It boasts more than 8,521 employees as of Dec. 31, 2021, and its board of directors includes former U.S. Treasury Secretary and Harvard University President Lawrence Summers, as well as former Goldman Sachs CFO David Viniar.

In January 2022, Square acquired Afterpay—the Australian-based buy now, pay later technology company. More than 50% of American consumers use buy now, pay later services, and it is expected that this number will significantly increase as more retailers offer the service. Now that Square merchants can offer the Afterpay to their e-commerce customers, they can capitalize on this growing trend.

Do I Pay a Finance Charge When Paying With Square?

Customers do not pay a fee when using Square unless the merchant applies a service charge to sales. However, Square charges sellers 2.6% of sales and $0.10 for processing contactless payments, 3.5% and $0.15 for manually keyed-in payments, 2.9% and $0.30 for invoice payments, and 3.5% and $0.15 for invoices with cards on file. Other payment types have different fee structures. Square registers purchased before August 20, 2019, have a flat fee—2.5% and $0.10—for all payment types. Square does not, however, charge for recording payments.

Who Owns Cash App?

Block, Inc., formerly known as Square, Inc., is the parent company of Square, Cash App, and other companies.

Is Square, Inc Safe to Use?

Square is relatively safe to use as payments are encrypted and the company dedicates a team of security professionals to monitor transactions. Also, their hardware is manufactured in-house and has security features built-in.

Article Sources
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