The payments landscape is evolving at a truly astonishing pace, and a company like Square (NYSE:SQ) is at the forefront of its innovation. Whether it's providing cutting-edge payment and point-of-sale solutions to merchants or offering consumers an easy way to handle their financial transactions with its Cash App, it’s safe to say that Square is a company that is disrupting the financial services industry. Although the stock delivered incredible returns in 2020, there are plenty of reasons to believe that more upside is in store for Square investors given how quickly fintech solutions are penetrating the business world.
What’s great about investing in a company like Square is that its products and services are in demand from businesses worldwide. The company also recently announced the launch of a banking business that could attract even more customers to its rapidly growing payment ecosystem. If you are interested in a compelling fintech stock to own for the long-term, Square certainly fits the bill.
Here are 3 reasons why Square is a fantastic fintech stock:
1. Banking Business a Potentially Brilliant Strategic Move
This week, Square announced that it is launching a new product called Square Banking that could end up helping it become the go-to financial services company for small businesses around the world. The new suite of financial products includes checking accounts, savings accounts, debit cards, and loans and is intended to help small business owners easily manage their cash flow. While the prospect of traditional banking services isn’t necessarily a groundbreaking update, there are a few reasons why this is exciting news for the company.
Square is expanding its payments ecosystem dramatically with this strategic move and is now directly competing with the largest banks in the world. Since there are already plenty of small business retailers using Square’s register and card reader products, the ability to send and receive their money within one network means that Square customers really won’t need separate bank accounts anymore. It’s a bold move by the company that could pay off in a big way over the long term, which is a big reason to consider adding shares.
2. Cash App Momentum
Another reason why Square is a fantastic fintech stock is that it’s a multi-faceted company with several different areas of its business that are growing fast. The company’s Cash App product particularly stands out, as it delivered strong Q1 revenue growth of 666% of $4.04 billion. If you aren’t familiar with Cash App, it’s a peer-to-peer money transfer service that has a lot to offer. Cash App users can send and receive money, use a debit card called a “Cash Card” to make purchases using funds in their Cash App account, and even invest in stocks and Bitcoin using the application.
Cash App clearly has a lot of momentum at this time, and it’s perhaps one of the most exciting components of Square’s business. Consider some of the benefits of Cash App, which include no fees on basic services, free ATM withdrawals, cash bonuses for referrals, and the ability to invest all in one convenient application. Cash App Business GPV was $3.4 billion in Q1, up 227% year-over-year, and confirmation that businesses are also fans of the company’s app, not just consumers. It will be very interesting to see how Cash App performed for the company in Q2 when Square reports its earnings on Aug. 5.
3. Huge Upside Internationally
It’s almost inconceivable to think that during Square’s last fiscal year, it only generated 6% of its total revenue internationally. This tells us that the company has plenty of growth potential outside of the United States, which is another great reason why it's such an intriguing fintech stock. The company’s payment and point-of-sale solutions can help small business owners simplify their financial framework regardless of where they are in the world, and there is a significant opportunity for the company to take market share from international competitors given its strong product portfolio.
Square launched Square Terminal in Japan last quarter and Square Register in both the U.K. and Australia, and investors should keep an eye out for any other moves that the company makes to expand its international presence. The company also doubled its gross profit in Australia last quarter, the company’s largest international market at this time, which could be a sign of good things to come. Whether it's providing payment solutions to restaurants, retail, or e-commerce businesses, it’s safe to say that the sky is the limit for Square if it can successfully expand its payments network to new countries.