Square Competitors Analysis [2021]: 5 Strongest Competitors

Square [NYSE: SQ] is an innovative technology company that provides financial services to individuals, merchants, and nonprofits. Founded in 2009 by Twitter co-founder Jack Dorsey, it has its headquarters in San Francisco, California, with operations across the United States, Canada, Ireland, The UK, Japan, and Australia.

Square launched its IPO on November 19th, 2015, with an initial valuation of $2.9 billion. As of September 10th, 2021, it had a market value equity of $115.532 billion and an enterprise value equity of $115.22 billion. (Finance. yahoo) The company’s revenues for the 2021 financials amounted to $15.931 billion, representing a 170.72 percent increase Y/Y with a net income of $0.574 billion, representing an 89.29 percent increase Y/Y.

Square’s performance metrics reveal some interesting insights on the development of their business and future growth prospects. The POS industry is evolving rapidly, with small business transactions across all channels, including mobile phones and social media. As Square is leading the pack in mobile payments innovation, its growth prospects are significant.

Square Business Strategy

Square generates revenues through transaction fees, subscriptions, and services. In addition to its traditional Point of Sale services, the company offers a suite of tools that allow businesses to accept card payments online through its subsidiary, Square Market. It offers a suite of hardware and software that enables merchants to accept cashless payments through their smartphones, tablets, or other mobile devices, with no costly equipment to maintain.

The company’s product line entails several hardware devices, including Chip & Swipe Reader, Square Stand, and card readers for iPhone and Android. A real game-changer was Cash App, which facilitates peer-to-peer cash transactions. Square’s innovation in payment technologies has significantly increased the adoption of mobile payments.

Earlier on, Square focused on content creation through customer testimonials on social media. They began with a blog and had some thought pieces and exciting posts from merchants on using the product. Their main target was social media savvy and tech-loving early adopters.

As the company grew, it diversified its product line leveraging its loyal customer base to bring forth innovative ideas. It now offers a suite of tools that allow businesses to accept card payments online through Square Market.
Square also focuses on strategic acquisitions to strengthen its position and diversify its product lines. After acquiring Caviar in 2015, a restaurant delivery service for offices and homes, it targeted a new niche market by launching a pilot program to deliver groceries. Long-term products such as Square Cash and Square Payroll are set to propel the company’s revenue further.

Square SWOT Analysis

Strengths

  • Strong Brand Portfolio: Square has a robust portfolio of brands that it leverages to enter new markets and attract customers. Its brand portfolio includes Caviar, Square Market, and its main payments app, Cash App. The company successfully acquired and integrated other companies into its brand portfolio, setting a new standard for the entire industry.
  • Global Presence: Square is the leader in mobile payments innovation. It has a strong presence across United States, Canada, Ireland, The UK, Japan, Australia, with its headquarters in San Francisco. With its global presence, the company has the wider acceptance of its products among merchants globally.
  • Financial Performance: Despite a slow start upon its IPO, its financial performance has shown consistent growth. Square’s revenues have surged due to its diversified product line, increasing customer base, and robust revenue-generating initiatives.

Weaknesses

  • Poor Inventory management: Despite having a diversified product line, the company lacks strong inventory management. Often the company suffers due to its inability to meet demand, leading to customer dissatisfaction. It is still working on improving its inventory management to provide more reliable services to customers.
  • Controversies and Legal battles: The Company has faced several controversies and has been involved in several lawsuits. At some point, the wall street journal reported that the company sent wrong transaction emails that led to the ouster of a woman’s impending divorce. In April 2021, four merchants filed a class-action lawsuit against Squire with allegations that the company violated antitrust land fair competition laws that made them lose money. Such claims and controversies can hamper the image of the company and damage its brand portfolio.

Opportunities

  • Data Analytics Market: Square has an opportunity to improve its product portfolio and diversify the services offered. The company can leverage its data analytics technology for strategic collaborations and acquisitions to enter new markets such as healthcare, insurance, automobiles, and other related fields.
  • Gig Services Market: As the gig economy continues to grow, Square has an opportunity to expand its market base by exploring this market segment. It can acquire or form long-term partnerships with companies in this market segment to better compete with other companies.

Threats

  • Aggressive Competitors: The Company’s continued growth depends on new product development, market penetration, and customer acquisition. Square has to compete with some of the biggest companies globally, such as Shopify, Stripe, and PayPal. With such strong competitors, the company must work vigorously on its product development and marketing campaigns to stay ahead of the competition.
  • Mergers and Acquisition: The Company’s performance has been on the upswing. Still, there is a clear threat of M&A. If Square experiences a slowdown in its revenues and growth rate, it will be an attractive target for other companies looking to expand their product portfolio and market share.
  • Cyber Crimes: With the increasing number of cyber-attacks on businesses, Square faces a serious threat from hackers. Failure to protect its clients’ financial information can lead to credit card fraud and loss of trust among consumers.

Square Competitor Analysis

Square competes with several companies across various industries. To better compete with these companies, Square needs to improve its product portfolio and diversify its services. This section goes deeper into Square’s competitors and evaluates them based on their product line, revenue generation, market presence, and other factors.

1. PayPal

PayPal [NASDAQ: PYPL] is an American multinational e-commerce company that provides online financial services. It has its headquarters in San Jose, California. The company was founded in 1998 and is led by its CEO Dan Schulman.

PayPal offers online money transfers, payment processing services for online vendors, and digital wallet services. In the second quarter of 2021, PayPal reported over 403 million active registered accounts. This is up from over 346 million accounts in the second quarter of 2020.

While POS systems are a growing market, both Square and PayPal display commitment to ensuring that their products compete in this market. Both companies design POS systems that help small businesses track inventory, view reports online, accept payments from customers, and more.

Although both companies provide avenues for all types of transactions, PayPal is more geared to online transactions, while Square focuses on in-person credit card processing. This, in itself, has its drawbacks and benefits, but it also places PayPal in a more favorable position when compared to competitors.

For the quarter ending June 30th, 2021, PayPal recorded a revenue of $3.65 billion, representing an 18.57 percent increase Y/Y. The company currently has a market cap of $334.084 billion. With its robust revenue growth, PayPal poses a significant threat to Square in the POS systems industry.

2. Stripe

Stripe is an American global online payment company based in San Francisco. Founded in 2010 by Patrick and John Collison, this company provides payment APIs to facilitate online payments. Different companies can integrate with Stripe to accept payments regardless of size, location, and business type.

Stripe offers a developer-friendly API to merchants. This allows third-party developers to integrate Stripe into their websites and apps. While both Square and Stripe have a robust developer following, Stripe has been quick to adapt to the fast-paced changes in the tech industry. This is evident from its decision to double down on React Native development.

Although Stripe offers a robust POS system for businesses, it has not made its mark on the market. Square wins with its in-person payment processing system. However, Stripe accepts more payment methods and manages businesses with a lot more ease.

In 2021, Stripe raised $600 million in funding at a valuation of $95 billion. The company intends to use the money to further its European operations and overall expansion. With this funding, Stripe aims to take its payment processing service global.

3. Shopify

Shopify Inc. is a Canadian commerce company that operates an online store platform for small and medium-sized businesses. Founded in 2006 by Tobias Lutke, Daniel Weinand, and Scott Lake, the company currently has its headquarters in Ottawa, Canada. Shopify offers e-commerce solutions through customizable themes and secure payment processing at checkout.

Shopify and Square compete in similar markets, which is why they are considered direct competitors. Shopify, unlike Square, has experience in the e-commerce industry, which puts it at an advantage. Although Shopify focuses primarily on e-commerce, it does offer POS systems to merchants in the physical market. With this, Shopify places itself in an interesting position where it has two robust business models.

Shopify boasts well over 7,000 employees, which is a testament to its strength in the market. In terms of revenue, Shopify reported revenue of $1.119 billion for the quarter ending June 30th, 2021. This represents a 56.71% increase from the previous year. The company’s operating income for the same period was $ 0.139 billion. With a current market cap of $185.391 billion, Shopify poses a serious threat to Square in the POS systems industry.

4. Intuit QuickBooks Payments

Intuit is a financial and tax preparation Software Company based in Mountain View, California. The company was founded in 1983 by Scott Cook and Tom Proulx and currently has its headquarters in Mountain View, California. Intuit provides business solutions to help entrepreneurs manage their finances with ease.

Intuit’s QuickBooks is a complete business management tool for businesses and individuals. With it, users can send quotes to customers, track inventory, view reports online, accept payments from customers, and more. The intuit POS system is built for retail businesses, online and physical. It provides merchants with an integrated multi-channel retail experience that allows for contactless payments, card on file capabilities, and order management.

While both offer similar services, one big difference to note is that Square accepts cash payments, but QuickBooks doesn’t. Customers using QuickBooks can only pay with debit and credit cards, which is a big minus for this company. Moreover, Square’s flexible pricing model is more beneficial to small businesses looking for affordable POS systems. This, along with Square’s better reputation in the payment processing industry, makes it a serious competitor of QuickBooks.

5. ShopKeep by Lightspeed

Lightspeed [TSX: LSPD] is an omnichannel retail software solutions company based in Montreal. The company offers Ecommerce and POS services to small and medium-sized businesses. ShopKeep merged with Lightspeed in 2020 to further its mission of simplifying retail for business owners.

Shopkeep by Lightspeed is a significant competitor to Square because both companies offer similar services. Both provide businesses the ability to accept payments conveniently, manage inventory, and track sales history. The company’s POS system is also compatible with iPhone, iPad, and Android tablets.

With all the services it offers, ShopKeep by Lightspeed proves to be a solid competitor to Square. Its integrated technology provides retailers with tools that help run their business more effectively. To top it off, the company’s complete inventory system is worth noting. With the ability to sync its software with different devices, ShopKeep becomes a valuable asset for retailers who want convenience and efficient results.

From its 2021 financials, Lightspeed recorded revenues amounting to $222 million, representing an $84 percent increase from the previous year. It currently has operations in over 100 countries with about 199,000 customer locations. With such a strong revenue and operations increase, ShopKeep by Lightspeed is a company that Square should watch.

How Square Stands Out Against Its Competitors

Square may have started as a simple mobile payment processing service for individuals, but it has become more. Square’s main advantage is the fact that its products are extremely versatile. The company allows users to accept credit card payments and provides inventory management, payroll through Vend, and POS systems for brick-and-mortar retail businesses.

Another unique advantage is that Square can sell directly to business owners, which is a huge plus. It gives Square complete control of its products and services, which enables it to offer reliable support. Furthermore, its flexible pricing model for small businesses makes it stand out against competitors with a fixed price plan.

The company keeps on updating its services and products to provide convenience to its customers. Square already has innovative services, including Square Payroll, Square Cash, and Square Capital. With the introduction of Square Banking, the company aims to provide seamless integration of payments and personal finance.

Its extensive product portfolio and capabilities make the company a well-rounded and competitive force in the payments industry. Moreover, its history of reaching out to businesses with its remarkable simplicity makes it an industry leader in the space compared to established companies such as PayPal.

Square Competitor Analysis (FAQs)

Question: Who is Square’s biggest competitor?

Answer: Square’s biggest competitor is PayPal Here. Despite being an industry leader in other segments, PayPal has to be on top of its game to keep Square. However, Square competes with other companies such as Shopify, Intuit, and other mobile payment processing services.

Question: Is Square owned by Apple?

Answer: Square is a publicly-traded company, and Apple doesn’t own it. Square was founded by Jack Dorsey, who is also the founder of Twitter. However, its service can be used on Apple products.

Question: Do I need a Tax ID to use Square?

Answer: You don’t need an EIN or Tax ID to use Square. However, you need to enter your social security number when you are setting up your Square account.

Question: Who is Square’s biggest competitor?

Answer: Square’s biggest competitor is PayPal Here. Despite being an industry leader in other segments, PayPal has to be on top of its game to keep Square. However, Square competes with other companies such as Shopify, Intuit, and other mobile payment processing services.

Question: Is Square owned by Apple?

Answer: Square is a publicly-traded company, and Apple doesn’t own it. Square was founded by Jack Dorsey, who is also the founder of Twitter. However, its service can be used on Apple products.

Question: Do I need a Tax ID to use Square?

Answer: You don’t need an EIN or Tax ID to use Square. However, you need to enter your social security number when you are setting up your Square account.

Conclusion

Square stands out against its rivals because of its flexibility in pricing, broad product and service selection, and accessible and efficient customer service. The company can cater to a wide range of customers and provide valuable solutions at different price points with all these features.

The competition in the industry will continue as companies such as PayPal, Shopkeep by Lightspeed, and Intuit (Quickbooks) keep on updating their services to offer convenience and better results to customers. Square’s leadership position in the industry will be challenged as it faces many up-and-coming competitors.

Further Read:

References

https://finance.yahoo.com/quote/SQ/key-statistics/

https://www.macrotrends.net/stocks/charts/SHOP/shopify/revenue

https://s28.q4cdn.com/517092977/files/doc_financials/2021/ar/AnnualReport2021(Eng).pdf

https://stripe.com/newsroom/news/stripe-series-h

https://www.statista.com/statistics/218493/paypals-total-active-registered-accounts-from-2010/

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