Steal This Idea, Apple

If the iPad is the new cash register, then why is Square the one offering cheap and seamless cash advances to retailers?

Jun 9, 2014 at 12:00PM

Square isn't just disrupting the cash register. It's also disrupting the bankers lending cash to small businesses via a new program called Square Capital. Apple (NASDAQ:AAPL) should either copy or invest in what Square is building.

How to earn 10% interest without trying
The idea is simple. Retailers sell a portion of future sales in exchange for an up-front capital infusion. So, for example, let's say Square lends your business $10,000. You repay $11,000 a transaction at a time, taken as 10% of each day's sales. No minimums required.

Banks aren't as forgiving, and rightfully so, since lending to entrepreneurs tends to be a tricky business. In 2009, nearly 12% of Small Business Administration loans defaulted, up from a reported 7.4% in 2005 -- startling numbers that suggest Square Capital will suffer serious losses at some point.

On the other hand, Square processes millions of transactions daily. Those bits and bytes of information  are revelatory, helping the company to determine a proper-sized capital infusion without vetting a business plan or checking a credit score. For Square, data determines default risk.

Niche oriented
Of course, Square isn't the only company with this sort of information handy. also processes an extraordinary number of transactions. The difference is that while Square serves mom-and-pop shops, Amazon serves itself and drives Ma and Pa out of business.

Contrast that with iTunes and the App Store, which enable commerce for the enterprising. Apple has paid iOS developers at least $15 billion since inception and today serves nearly 800 million iTunes accounts. Few are as privy to the inner workings of digital businesses.

Now consider what we saw at this week's Worldwide Developers Conference. HealthKit represents a foray into health data management. HomeKit is Apple's attempt to unite the competing elements of home automation. CEO Tim Cook's plan is to grow by dominating interesting, important niche markets. A RetailKit with the iPad at the center can't be far off.

Mr. Cook? Yes, your $2 billion is right here
Think about it. Square already supplies the key equipment that turns an iPad into a cash register. Investing in Square Capital -- or offering an alternative -- could help Apple tip the scales and dominate the estimated $2 billion market for mobile point-of-sale (POS) systems while putting a portion of its $150 billion-plus in cash and investments to work earning interest at far above-market rates.

Small business financing is changing. Apple can either accelerate the shift and profit or get left behind. Do you agree? As an investor, what other verticals would you like to see Apple pursue? Leave your thoughts in the comments box below.

Steal this stock idea before we change our minds
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Square Capital holds special appeal to small businesses. Credit: Square.

Tim Beyers owns shares of Apple. The Motley Fool recommends and Apple. The Motley Fool owns shares of and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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