Podcast #40 - Square deep dive

Square was founded in 2009, when glass-blower Jim McKelvey found he was unable to complete a sale because he couldn't accept credit cards. He discussed the problem with his friend Jack Dorsey, and they co-founded Square, initially selling a cost-effective mobile phone accessory that allowed small businesses to accept credit card payments. This has since expanded to over 30 products and services for both sellers and consumers.

Square is one of our model portfolio stocks, and in this week’s pod we deep dive into the company and discuss recent developments for this fast-growing player in the e-payments space.

• What started with a dongle for a mobile device to allow sellers to accept credit cards has since expanded to a range of point-of-sale (POS) systems and seller services. Square have also launched tailored products and services for specific businesses, for example the Square Kitchen Display System (KDS) recently launched as a standalone product worldwide to help restaurants manage and fulfil orders more efficiently
• The use of electronic payments has been increasing for many years and was accelerated by the pandemic. Digital wallets are now the most popular form of payment globally. The Square Cash App introduced in 2013 is one of the most popular digital wallets in the US, with 36M monthly active users at the end of last year, a jump from 24M at the end of 2019
• Square started offering Bitcoin trading in its Cash App in 2018 and the company has increased its stake in crypto by buying $170M of Bitcoin, representing 5% of its cash reserves. They saw over 1M users buy Bitcoin for the first time in January of this year, and their revenue from Bitcoin trading surged to $3.5B in Q1. This may be a cause for concern if crypto sees increasing regulation, restrictions, or volatility
• Square acquired the music streaming service, Tidal, earlier this year. Tidal’s once distinguishing feature of high-quality lossless audio are now available on other music streaming services, but the relationships with the artists may be the key differentiator. Could Square and Tidal become the "Shopify for music artists"?
• Another recent acquisition was Credit Karma Tax, a free tax filing tool that Square plans to integrate into its Cash App, further enhancing the Square payment ecosystem. Square payment processing is currently integrated with TurboTax from Intuit to simplify the tax filing for sellers. The acquisition of Credit Karma Tax may suggest a bigger move into the tax filing business, perhaps competing with Intuit instead?
• Square officially became a bank earlier this year. Previously, Square offered financial products such as small business loans via a partnership with Celtic Bank. They are now able to offer these products directly, and have recently announced they will launch checking and savings accounts, competing with incumbents such as JP Morgan and Wells Fargo

The following companies are mentioned in this episode: SQ, INTU, SHOP, MELI, SE, GOOG, APPL, PYPL

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