In this video I will be talking about Square (NYSE:SQ). Stripe and PayPal (NASDAQ:PYPL) are expanding into areas that Square is known for, such as POS solutions and portable card readers. And unlike Square, both Stripe and PayPal are companies with a global presence. Maybe it's time for Jack Dorsey to leave so he can focus on his Bitcoin addiction?
Competition is growing
Stripe recently announced its new Stripe Reader M2, an easy-to-use mobile card reader designed for fast, secure payments. PayPal-owned Zettle recently announced that it is launching its services in the United States. Both will directly compete with Square's services.
You may never have heard of Stripe, but you have almost certainly interacted with a Stripe-powered business. Right now, what you need to know is that Stripe is a payment infrastructure company being used by some of the biggest companies out there.
Square hasn't been great with acquisitions in recent years. In 2014, Square announced the acquisition of Caviar in a deal worth $100 million. It never really took off, so Square sold it to DoorDash for $410 million in 2019. Meanwhile, Square missed out on potential acquisitions such as Galileo, which was acquired by SOFI (NASDAQ:SOFI), and Marqeta -- even though Square has used both of those services extensively.
Last year Square bought Verse, a Spanish P2P payment company. It's Square's way of learning how the European market would use apps like Cash App. Buying a small Spanish payment app isn't going to give the company a lot of insights. But by changing its name to Cash App, Verse will instantly boost its user base because of the Cash App brand. But in my opinion, Square should have acquired a company like Revolut if it wanted to enter the European market. The fintech space is getting very saturated in Europe, and the clock is ticking for Square.
One of Square's main missions is to serve the unbanked, and yet it has not entered one of the most unbanked and underserved areas on the planet: Latin America. In some Latin American countries, just 30% of adults have an account with a major financial institution, in comparison to 90% in the U.S. and U.K. and 80% in China. This means that approximately 70% of the Latin American population is either unbanked or underbanked.
Don't get me wrong; Cash App in the United States is doing great and growing fast. It's acquiring customers for $5, which is incredible. But as a shareholder I find my patience growing thin because of the missed opportunities outside the U.S. market.
Jack is a big fan of Africa, but I'm afraid he's going to spend most of his time talking about Bitcoin and cryptocurrencies instead of expanding Square's and Cash App's reach. Yes, they might work hand in hand. But it's getting really frustrating for Square and Twitter shareholders alike to see the CEO spend more time talking about crypto than focusing on one of his companies. But Jack could still play his cards right and leverage Twitter's close to 200 million daily active users and jump-start a global payment network in an instant. I know that's what Mark Zuckerberg would do.
Do watch the video below for the full insights.
*Stock prices used were the closing prices of July 1, 2021. The video was published on July 4, 2021.