Square Capital Bulks Up Predictive Analytics Team

Square has made another acquisition focused on Big Data.

As part of its Square Capital team, the company is acquiring the team of Framed Data, a predictive analytics service, to help the business and its data scientists. Square already has this team tracking merchants’ transaction history to determine how it can offer them loans via Square Capital, but now, it appears to be getting more serious about the analytical side.

Because Square has to do its homework on the risk analysis side for each merchant — specifically, so it can know what loan rate to offer each particular merchant — giving its team of data scientists more assistance shows that Square is planning on continuing that side of its business model. But as Big Data tools become more attractive to bringing merchants onto its platform, this acquisition of a very specific team seems to fit the bill.

It is worth noting that Square is not acquiring Framed Data itself or its technology, as that product has plans to be shut down at the end of March. Framed Data itself served as an analytics platform to help its customers better understand user behavior to provide predictions on their actions related to in-app purchases.

For Square, Square Capital has become an increasingly relevant aspect of its business model, as evidenced by its earnings debut last week. Its first public earnings report showed growth at $374 million in revenue. This was a sight better in the fourth quarter of 2015 than a year ago, with 49 percent growth year to year and nicely above The Street, which was at $344 million. The net loss of about $0.20 per share was worse than the consensus of roughly $0.10, but clearly, eyes were on the top line and a loss is to be, and was, expected on continued investment in the firm’s operations. The actual red ink was $48 million, up from $37 million last year.

For Square Capital, it made headway as well, with $150 million in cash advances made in the quarter (the firm earns a fixed fee from each cash advance). CFO Sarah Friar said on the call that the firm made 70,000 cash advances (worth $400 million) in 2015 and that 90 percent of those customers wind up taking out another advance.

With the addition of the Framed Data team, it will enable the data scientists to build models that “allow us to further extend financing to businesses, including those that would otherwise find it difficult or impossible through traditional banking,” according to Square Capital Lead Jacqueline Reses.



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