Since its humble origins about a decade ago, Square (NYSE:SQ) has evolved from a niche business that made it possible to accept credit card payments through mobile phones into an impressive financial ecosystem for businesses and consumers alike.

Square's payment processing hardware now includes everything from its mobile readers to full-feature POS systems, and payment volume through its platform has climbed to more than $100 billion annually (and growing). It uses its merchant payment data to make business loans through its Square Capital business, and the company made 75,000 loans in the first quarter of 2020 alone. And on the individual side, Square's Cash App has 24 million active users and has expanded from a person-to-person payment platform into an investment platform, bitcoin exchange, and more.

A woman accepting a card for payment in a cafe.

Image source: Getty Images.

Many avenues for growth in the years ahead

Square's growth story in the fintech world has certainly been an impressive one, but I'd make the argument that we could still be seeing just the tip of the iceberg. Just to name some of the biggest potential catalysts, here's why I think Square could ultimately grow to many times its current size.

Payment processing volume: Square processes over $100 billion in annualized payment volume, but this is a tiny fraction of the $45 trillion in annual card payment volume that is expected to take place worldwide by 2023. It is estimated that as much as 80% of payment transactions around the world still take place in cash, and with the success Square has seen in recent years in bringing larger merchants into its ecosystem, the bulk of Square's payment processing growth could be ahead of it.

Banking services: Square Capital has been highly successful, and it's even more impressive that Square has found so much success in lending without actually being a bank. However, the company was recently approved for a banking charter, which will allow it to launch its new Square Financial Services subsidiary, which should allow Square to take this part of its business to the next level.  

Cash App monetization: Square has done a great job of monetizing its Cash App platform to this point, even compared with PayPal's Venmo. In the most recent quarter, the Cash App (excluding bitcoin sales) generated $222 million in revenue. Square has previously spoken about a desire to gradually build out the products and services offered by Cash App, with potential high-yield savings accounts, consumer lending products, and more. Plus, it's worth mentioning that the number of active users has tripled in the past two years, so the user base of 24 million could get much larger.

Square Online Store: This is perhaps the most exciting new growth avenue. Until now, Square has mainly focused on physical retail businesses. However, thanks to its acquisition of Weebly, it has started to offer its sellers the ability to easily create an online store, complete with curbside and in-store pickup functionalities. Online Store just recently launched, but the early growth has been quite promising.

International expansion/partnerships: Finally, it's worth mentioning that Square doesn't yet have a major presence in most international markets. It could eventually expand into new areas or form partnerships with other fintechs in desirable markets.

Don't be tricked by Square's premium valuation

At the current share price, Square trades for roughly seven times TTM revenue. And the company has had a few profitable quarters but isn't consistently making money yet. But that is OK. That's a much lower price-to-sales multiple than many tech companies with similar growth rates, and profitability is a secondary focus right now, as Square is reinvesting most of its income into the business to fuel growth.

In a nutshell, Square could certainly grow its revenue to several times its current level over the coming decade or so, and patient shareholders who buy the stock now could be handsomely rewarded over the long run.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.