Square’s Biggest Opportunity, According to Its CEO

Last month, Square (NYSE: SQ) CEO Jack Dorsey admitted his company is bad at something.

“We’re just really bad at introducing our products, our suite of products to our sellers. … A lot of that adoption by our larger sellers and our smaller sellers of multiple services has happened to us, we have not made it happen.”

Well, that was kind of a humblebrag, really. More than half of Square’s larger sellers already use multiple products. It’s also kind of surprising, considering Dorsey and CFO Sarah Friar have talked about how they really want to push merchants to take multiple products, as they see higher retention and engagement from those customers.

Given that Square has managed to get a good number of its merchants to adopt multiple products without significant cross-selling, that presents a huge opportunity for Square to improve engagement and retention while fending off competition.

Image source: Square.

Square is better positioned than anyone to sell its other products

Marketing is all about getting the right message in front of the right person at the right time. That’s really hard when you’re shooting blindly, but Square has an intimate understanding of its merchants’ businesses. It knows when they’re busy, and it knows when a business has a good day.

Importantly, merchants come to Square on a regular basis to check the health of their business using the Square dashboard. And that presents an opportune time for Square to introduce one of its other products. When the merchant isn’t busy and had a good day, they might be more likely to look at what else Square has to offer in order to keep growing the business.

Indeed, Square is investing heavily in data science and machine learning for all types of applications, including Square Capital, its business loan arm. Another potential application is marketing, and Square can start with marketing its own products.

Square has a growing list of ancillary products

In the last few years, Square has expanded well beyond payments processing. It now has an entire line item in its income reports dedicated to subscription and services-based revenue, which generated $97 million in the first quarter, nearly double the amount from the first quarter of 2017.

Some of the additional services Square offers are:

  • Square Capital offers business loans to merchants that typically can’t get a loan from a bank. Merchants pay back the loan with each customer card swipe, so their payments are tied to their revenue.
  • Instant Deposit allows merchants (and individuals using the Cash App) to receive their funds instantly instead of waiting a day or two for a typical transfer.
  • Caviar enables restaurants to reach customers looking to take out food instead of dining in. It also offers delivery.
  • Payroll makes it easy for merchants to pay their employees.
  • Appointments allows customers to make appointments at a service provider.
  • Invoices allows merchants to send a customer an invoice for payment.

Square also has unique platforms for retailers and restaurants with things like inventory management and tip splitting, respectively.

The list of additional services from Square will only continue to expand as the company looks to solve its merchants’ pain points.

Square has made it clear to investors that it’s more than just an all-in-one solution to accepting card payments with transparent pricing. Now, the company needs to make that clear to its customers. Doing so will produce more revenue for Square while also increasing the switching costs for its merchants. That’s a huge long-term opportunity, and it’s well positioned to capitalize on it.

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Adam Levy has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Square. The Motley Fool has a disclosure policy.

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