You know your stature by the enemies you make, right?
That’s the old saying at least. Well, “enemy” might be too strong a term — business is not war — but Square this week found itself a target of First Data and Fiserv, two big payments players merging in a $22 billion deal that will result in a consolidated organization called Fiserv. When talking about the deal, Fiserv CEO Jeffery Yabuki described Square as a threat to traditional banks. Nomura analyst Dan Dolev, meanwhile, called Fiserv's purchase of First Data “a defensive move.”
Square's intimidation factor comes from its expanding payments-and-commerce ecosystem — what Square is doing to attract and retain businesses. On Thursday (Jan. 17), for instance, Square announced the Square Card, a business debit Mastercard aimed at helping businesses manage cash flow.
The motivations behind that new card help illustrate why other companies see Square as a threat.
The new debit card can be used anywhere Mastercard debit cards are accepted. That enables small businesses to use funds that become available as soon as they make a sale — an increasing trend in the payments world, as recent PYMNTS research and coverage has demonstrated.
Businesses using the Square Card can view purchase activity alongside a comprehensive record of sales via the Square Dashboard and Square Point of Sale, and access reporting features that separate business and personal expenses. That makes it easier for businesses to get a sense of their financial health and to track expenses, Square said in the press release. Users can also export Square Card transaction data into formats for accounting.
Before that — and also this January — Square released an in-app payments software development kit (SDK) that will give developers and sellers alike a new way to process payments. The SDK is customizable and works with most payment types. It “includes a … user experience that guides buyers as they enter their credit card information, preventing errors and providing a smoother checkout experience.”
Square, which specializes in working with small- and medium-sized businesses (SMBs), also has its sights set on taking a larger role on other core functions for those organizations. A recent PYMNTS interview with Caroline Hollis, Square’s head of payroll, focused on automated payroll services — an especially complicated task during holiday shopping seasons, but never easy at any time of the year.
That’s not all — Square reportedly wants to go for a banking license. The company had previously asked to start a bank in September of 2017, but eventually withdrew from the process over procedural issues. After all, since its inception as a credit card-reading company for small businesses, Square has since expanded to offer other services, like digital money transfers and retail installment loans.
The world of payments and commerce — and point-of-sale (POS) technology in particular — is increasing moving toward the idea of the “one-stop shop” or integrated offerings to banks, merchants and a range of service providers. In fact, that very term was used by Fiserv and First Data executives when talking about the deal between their two companies.
That trend is certainly playing out in the world of SMBs — as Square and other have demonstrated — but that doesn’t mean the path toward that idea will be easy. In fact, as Nicky Koopman, vice president of content and value-added services at AEVI, discussed in a recent PYMNTS interview, one-size-fits all doesn’t always work for all SMBs. Customization has increasing attraction, and that will continue in the POS world.
All those forces will continue to play out as the newly consolidated Fiserv flexes its muscles and tries to take more share — and take more share from Square.