Exposure to 17,000 retailers
Square (SQ) recently entered a partnership with payments processor network provider 3dcart. According to a blog post by 3dcart, the partnership creates an opportunity for its more than 17,000 merchant clients to access the range of features that Square offers. Those features include online and offline sales integration, next-day direct deposit, and card-on-file services.
For Square, the deal means it joins 3dcart’s other payment processors such as PayPal (PYPL), which also offers businesses more than just payment processing but also automatic invoicing.
An estimated $632 billion market by 2020
The arrangement could benefit Square in several ways, including giving it a deeper e-commerce reach so that it can take greater advantage of the growing trend of online shopping. BI Intelligence, a research service of Business Insider, estimates that US (SPY) consumers will spend $632 billion online by 2020, nearly double the $385 billion it said US consumers spent online in 2016, as illustrated in the above chart. Therefore, the deal opens an opportunity for Square to grow fee revenue given 3dcart’s wide retailer network.
Market share gain
The partnership with 3dcart could also help Square accelerate its market share gain at a time of fierce competition for the control of the digital payments market. Not only does Square face a competitive threat from digital payments incumbents like PayPal and Alibaba’s (BABA) Alipay, but also from old-school payments providers like Visa (V), who are looking for growth opportunities online as e-commerce adoption grows globally.