Can Square Benefit from the Rise in Card Payments in the UK?



A shift to card payments

Consumers in the United Kingdom are shunning cash in favor of card payments, which should be great news for Square (SQ). In 2017, there were 13.2 billion debit card payments compared to 13.1 billion cash payments in the United Kingdom, marking the first time card transactions outnumbered cash transactions in the country, according to data from banking trade group UK Finance.

Cash accounted for 34% of UK payments in 2017, down from 61% in 2007. The decline in the use of cash is expected to continue, falling to as low as 16% of all payments in the United Kingdom by 2027.

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The United Kingdom is home to 5.6 million small businesses

Square launched its service in the United Kingdom in March 2017, marking its first landing in Europe. Square provides POS (point-of-sale) solutions that enable traders of any size to accept card payments. There were 5.6 million businesses in the United Kingdom at the start of 2018, according to government figures. Square estimated in 2017 that half of all small businesses in the United Kingdom didn’t yet take card payments, suggesting a massive market opportunity for its POS solution.

In addition to processing card payments for merchants, Square also runs a credit service through which it extends loans to small businesses. Square facilitated $405 million in small-business loans in the third quarter. PayPal (PYPL) and Shopify (SHOP) extended $1.0 billion and $76.4 million in small-business loans, respectively, in the third quarter. In addition to lending to its own business customers, Square has partnered to extend small loans to eBay (EBAY) sellers.

Revenue jumped 51% at Square

Square’s revenue rose 51% YoY (year-over-year) to $882 million in the third quarter. Shopify, Amazon (AMZN), and PayPal grew their revenues 58%, 29%, and 14% YoY, respectively, in the third quarter.


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