Investment Thesis

The mobile payment and financial services company rolled out a new service tailor-made for shop owners and retailers. Only time will tell about how this pans out for the new app in a market with several such service providers.

Square, Inc. (NYSE: SQ) has just announced and launched its newest creation - the Square retail app - touted as "a comprehensive backend package of tools that include complete coverage of inventory management, customer relationship management and employee tools."

Square is a popular tool for traders due to its wide array of software and hardware products, including the Square Reader, Square Stand, Square Cash, Square Capital and the Caviar service. Square Register, Square Payroll and Customer Engagement are all available through a monthly subscription. The launch of the Square Retail app is bound to bring a shake-up in the small business sector as merchants seek a simple but all-encompassing solution to their needs.

Modern business is increasingly reliant on cashless payments, and Square seems to be keen on grabbing a large market share through customer-centric innovations that ensure safety and convenience. Square's creations are built on the concept of leveraging technology to ease commercial transactions and keep track of financial performance. The new app is the first solely-owned product of Square this year, coming after the partnership with Apple (NASDAQ: AAPL) in January that saw the scrapping of fees incurred by Square users on Apple pay.

What is on the table?

The user interface of the SR app is most compatible with businesses that deal in processed or packaged products - read those that have barcodes. It contains a smart inventory management system, which makes it easier to search product information or sort out the inventory using an intuitive search bar.

The new dashboard enables users to create a directory containing customer profiles and add staff notes. The inbuilt CRM feature allows merchants to keep track of shoppers' habits such as frequency of visit, average amount of money spent and type of products bought.

Fragmented businesses will find the employee management tool useful in keeping track of shifts and hours worked. Perhaps the key feature of the app is its usability and convenience, which are the backbone on which Square builds all its apps. Also, SR joins the famed Square 'ecosystem', which is really about Square being a one-stop shop for all services required by businesses.

One factor that will make SR a frontrunner in the business apps is the "Build with Square" feature that allows users to customize apps for flexibility in business solutions. Further, as with all Square products, SR can be integrated into iOS, Android or tablet computers. Apart from the traditional 2.75% transaction fee, merchants will pay $60 monthly charges per register for the SR.

Conclusion

Since it IPO'd in 2015, Square has amassed a membership of more than 3 million merchants. In the last earnings call, Square seems to be living up to its call of giving the best value proposition to shareholders. Quarterly revenues exceeded the previous guidance, with payment volume going up 39% to $13.2 billion. This growth was driven by several factors including improved transaction speeds on card readers, faster checkout process and an increase in large-volume merchants by 55% YoY. Being a payments processing company, the performance of Square is largely dependent on the speed and convenience it affords its users.

Square is keen on nurturing the instant deposit service which allows users to transfer money to their bank account instantly at a 1% fee. Within one year, this service has seen 4 million deposits from 200,000 sellers.

The SR app is expected to add onto the already hefty profits from the payments business, which grew 36% to $134 million. The robust system is expected to be received well by large businesses in need of a robust system for their multiple needs. Also, Square is on a bid to reduce the transaction speed from 4 seconds to 3. Square is currently trading at $14.73. As a whole, I consider Square to be a worthwhile investment given the innovative line of products it has on offer. In addition, the strong focus on increasing the number of merchants on its platform ensures a steady revenue stream for the company.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Here's One More App For The Square Ecosystem - Seeking Alpha