Square began in 2009 as a payment service provider, enabling small businesses to process card payments with cheap white card readers and tablets. Since then, the company led by Jack Dorsey has added more services for businesses, a digital payment service for consumers known as Cash App, a payment platform for artists and a development platform. which plans to create a decentralized bitcoin exchange.
Cash App’s growth exploded earlier this year, in part due to a flood of stimulus payments in the event of a pandemic. The digital payments app allows people to send money to each other through smartphones, buy things with a prepaid debit card, and invest in bitcoins and individual stock fractions. It competes with digital wallets from other payment companies, such as PayPal.
In August, Square announced plans to buy Afterpay, an Australian company that offers buy now and later services, for around $ 29 billion in shares. At the time, Square said the deal was aimed at more closely linking the company’s Cash app and seller ecosystems and fostering commerce between merchants and consumers.
The Wall Street JournaI spoke to Amrita Ahuja, CFO of Square, about managing the company’s growth strategy. Edited excerpts follow.
WSJ: How does the company plan to develop its activity?
Ahuja: We see our company as an ecosystem of startups. And each of these startups can contain additional startups. We test with the launch of something small, we learn, we get customer feedback, we iterate, and we end up doubling down on things that work.
WSJ: What is your share of the payment applications market?
Ahuja: [In the places where we operate], there is a total potential market of $ 100 billion on the seller side of the house and a total market of $ 60 billion on the Cash App side of the house. In both cases, we are about 2% or 3% penetrated. The majority of what is served in these two markets today is done by legacy institutions.
WSJ: How do you plan to increase your penetration rate?
Ahuja: We see three main ways [to grow Cash App’s penetration rate.] One is the adoption of the product within our existing customer base. The second is marketing to reach new customers. And a third key way is to extend and broaden our product line.
We have acquired Credit Karma Tax and hope to have a more integrated offering with a new tax season, and we just launched Cash App Pay, which allows Cash App users to pay businesses on the seller side of our ecosystem. [by scanning a QR code]. It really reduces friction at the checkout and gives people a quick way to use their Cash App balances.
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WSJ: What do you see as the biggest obstacle to getting more people to use Cash App? Are the elderly slow to change?
Ahuja: Our largest set of customers are Millennials and Gen Z customers. But we’ve seen tremendous growth and we’re seeing traction with older demographics, as well as higher income customers. And this is an area that we want to continue to develop. When you think of layering Afterpay on top of Cash App, we see an opportunity to bring together two very complementary customer demographics. We start with millennials and millennials, but then scale up in terms of demographics with Afterpay, bringing a more global customer base and higher revenues.
WSJ: What makes Square different from other payment providers?
Ahuja: We have the opportunity to sit on both sides of the counter and find ways to add unique value to both the merchant and the consumer in this exchange.
WSJ: The company announced in August that it would spend $ 29 billion on Afterpay. What were the considerations behind the transaction?
Ahuja: “Buy now, pay later” is a very attractive category that serves both merchants and consumers. Consumer preferences are moving away from traditional credit cards to more understandable products like buy now pay later [a type of short-term financing that allows consumers to make purchases and pay for them later, in installments]. Merchants see buying now pay later as an opportunity to increase conversions, increase average order volumes, and acquire new customers.
Many credit cards have lost the trust of millennials and millennials, many of whom grew up in the aftermath of the 2008 financial crisis. They see the hidden fees, late fees, interest, and the downward spiral. sometimes credit card debt. From the consumer’s point of view, Afterpay is a free service for the customer. If the installments are made on time, there is no interest.
WSJ: Square last year obtained a banking license. Will the business be more like a traditional bank?
Ahuja: The banking charter today is focused on serving small businesses, a category that has been largely underserved by traditional financial institutions. It doesn’t necessarily replace what a bank does today, it serves something where the need has not been met. From a payments and software perspective, there may be an opportunity for us to move upmarket over time.
WSJ: What is the company’s perspective on bitcoin, compared to other digital assets? You have a feature that allows people to trade bitcoin.
Ahuja: We finally believe that there is a high probability that the Internet has a native currency. And we believe that bitcoin is the strongest competitor to be this native currency. It is the safest and the most resistant. We believe that it is principled because it is decentralized, transparent and is based on a development model based on consensus. Bitcoin can provide financial access to those who have been historically marginalized by existing financial systems or who are wary of their federal banks, as we have seen in some regions, such as Latin America.
WSJ: Why are you so bullish about bitcoin?
Ahuja: We have been on the market for more than three years with this [Cash App] bitcoin, and we’ve seen increasing adoption. We had three million people who bought or sold bitcoin through Cash App in 2020. Then, in January alone, we had one million people who are new to bitcoin. We believe its adoption, popularity, understanding and education are increasing. And we want to be part of this ecosystem, learn and grow with it.
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WSJ: What does this increased interest in bitcoin mean for your business?
Ahuja: We believe there is an opportunity as a business to learn and participate in a disciplined manner, both from a product perspective – as we have been doing for a few years with Cash App, where we enable customers to buy and sell as little as $ 1 worth of bitcoin – or in building that new TBD business unit that will turn bitcoin on and off and create a larger, more decentralized financial ecosystem.
WSJ: What are on- and offramps?
Ahuja: Converting fiat currencies into cryptocurrency is the ramp. The offramp is the other way around, converting your crypto back to fiat. What we have seen is that there are on- and offramps where these conversion mechanisms are unequal. They are different market by market, they are not always easily accessible to consumers. And so creating these on- and offramps is what TBD intends to focus on.
WSJ: How long will it take to develop them?
Ahuja: We have no deadline to share at this stage.
WSJ: Square also bought bitcoin for its corporate treasury. What is the reasoning behind this investment?
Ahuja: We bought bitcoin for our own balance sheet, which we believe not only shows that we have skin in the game towards that more inclusive and broader future that I have described for bitcoin, but could also offer attractive long-term financial benefits.
WSJ: How concerned are you about the lack of US regulation regarding bitcoin and other crypto assets? There are also no specific rules on how to account for these assets.
Ahuja: We certainly have a lot to learn. From a balance sheet perspective, there could be fluctuations from quarter to quarter in how you mark the value of bitcoin and its treatment as an intangible asset from an accounting perspective. .
We believe that the potential longer term opportunity justifies any short term volatility. We also believe there are some interesting financial benefits, offering diversification and potentially longer term inflation hedge given the scarcity of bitcoin compared to other currencies.
Nina Trentmann is bureau chief of the CFO Journal of the Wall Street Journal. Email him at [email protected]
This article was published by Dow Jones Newswires