San Francisco-Based Tech Giant Square Set To Land Major Contracts In UK, Following CEO Jack Dorsey’s Visit
CEO Jack Dorsey’s Square recently expanded into the UK as part of its global expansion drive, which has included launches in Canada, Australia, and Japan in addition to the US. Under Dorsey’s genius, Square could strike a goldmine in the UK given the large number of small businesses in the country. Jack Dorsey, who runs both Twitter and Square, estimates that there are more than 5 million small businesses in the UK and about 50% of them lack the ability to accept any form of payment other than cash. Thus, Square is hoping to pitch its payments hardware (card readers) and software to the millions of UK vendors that haven’t had the ability to access card payments due to reasons like transaction costs and speeds.
Business trades say, for Square, UK expansion creates an opportunity for the company to grow its subscription revenue, one of its small but promising businesses. The company reported subscription and service-based revenue of $41 million in 4Q16, up 81% from a year earlier. The above chart illustrates Square’s quarterly subscription revenue trend.
According to The Guardian, Square charges a flat transaction fee of 1.8% compared to the 2.8% fee charged by its UK rival iZettle. Additionally, merchants using Square solutions can have payments directly deposited to their bank accounts the next day instead of waiting for days, weeks, or even months as is the case with many payment processing services. The lower fees and faster account loading could give Square an advantage in appealing to small UK businesses.
Square’s continued growth investments are likely to delay the realization of meaningful profits. It’s investing in new services such as credit to small businesses and expansion into new geographical markets such as the recent launch of its service in the UK following rollouts in Canada, Japan, and Australia.
Though the expansions are producing more revenue, they are also weighing on the bottom line. When Square launches a new product or expands into a new market, marketing expenses are likely to go up as the company pumps more money into advertising campaigns to popularize its products and services.