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Square will partner with Upserve, a startup that processes card payments and provides business-management tools to small restaurants, to offer Square Capital loans to its clients beginning in the “coming weeks.”
This marks Square Capital’s first expansion into lending to merchants that are not already Square clients. Upserve and Square will select eligible merchants, who can then select and receive loan offers directly through their Upserve Smart Management Assistant portal. Like all other Square Capital merchants, Upserve merchants will repay the loans as a fixed percentage of daily sales.
The partnership has the potential to accelerate Square Capital’s already-strong growth.
- Upserve could considerably increase the size of Square Capital’s merchant pool.Upserve serves 7,000 restaurants in the US and processes $8 billion in transactions annually, according to Bloomberg. The platform is also adding 200-250 new restaurants per month on average. It’s likely that many of those restaurants are small-to-medium sized and looking for access to capital, which makes them good candidates for a Square loan.
- Growing the pool could help maintain strong Square Capital growth. Square Capital extended 34,000 loans worth $189 million in Q2 2016, up 123% year-over-year (YoY) and 23% sequentially. The segment is growing the firm’s software and data business, which is poised to become the primary driver of Square’s overall business in the next several years. Accelerating the growth of a major driver of one of Square’s most important segments could be critical to sustaining that segment, and therefore Square’s overall business.
But it could also add new risk to the firm’s lending business. Historically, Square Capital has been a relatively low-risk offering for Square, since the firm’s access to its clients’ data allowed it to make extremely educated decisions about loan eligibility. That paid off — the service’s default rate hovers around 4%, according to Bloomberg.
Expanding into Upserve merchants, where Square’s knowledge is more limited, could potentially raise the default rate, which in turn might cause investors to become less confident in Square Capital's performance and slow the rate with which they purchase loans, therefore hurting the segment. That means that the partnership’s results will be an important benchmark for Square Capital’s big-picture business strategy in the coming quarters.
Mobile payments are becoming more popular, but they still face some high barriers, such as consumers' continued loyalty to traditional payment methods and fragmented acceptance among merchants. But as loyalty programs are integrated and more consumers rely on their mobile wallets for other features like in-app payments, adoption and usage will surge over the next few years.
Evan Bakker, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on mobile payments that forecasts the growth of in-store mobile payments in the U.S., analyzes the performance of major mobile wallets like Apple Pay, Android Pay, and Samsung Pay, and addresses the barriers holding mobile payments back as well as the benefits that will propel adoption.
Here are some key takeaways from the report:
- In our latest US in-store mobile payments forecast, we find that volume will reach $75 billion this year. We expect volume to pick up significantly by 2020, reaching $503 billion. This reflects a compound annual growth rate (CAGR) of 80% between 2015 and 2020.
- Consumer interest is the primary barrier to mobile payments adoption. Surveys indicate that the issue is less the mobile wallet itself and more that people remain loyal to traditional payment methods and show little enthusiasm for picking up new habits.
- Integrated loyalty programs and other add-on features will be key to mobile wallets taking off. Consumers are showing interest in wallets with integrated loyalty programs. Other potential add-ons, like in-app, in-browser, and P2P payments, will also start fueling adoption. This strategy has been proved successful in China with platforms like WeChat and Alipay.
In full, the report:
- Forecasts the growth of US in-store mobile payments volume and users through 2020.
- Measures mobile wallet user engagement by forecasting mobile payments' share of their annual retail spending.
- Reviews the performance of major mobile wallets like Apple Pay and Samsung Pay.
- Addresses the key barriers that are preventing mobile in-store payments from taking off.
- Identifies the growth drivers that will ultimately carve a path for mainstream adoption.
To get your copy of this invaluable guide, choose one of these options:
- Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of how mobile payments are rapidly evolving.
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