Good SQ Article -TMF

…3 stories shape the future of Square
These three stories – a growing ecosystem, international expansion, and the potential addition of a banking arm – are in their early stages, but they are key points for investors to watch…

…At this point, Square is in the first inning of a long ball game. Just 4% of its revenue came from international markets through the nine months ending Sept. 30, 2017. But the market opportunity is tremendous: The number of small businesses abroad is 125 million versus 21 million in the U.S., and the volume of card transactions abroad is $55 trillion versus $10 trillion in the U.S…





I’ve mentioned it here before but the international markets do not represent the same kind of opportunity as the US in the payments space. Whilst much larger in scale in Asia for example, (40% of the world’s population who seem all pretty consumerist), the evolution of the payment landscape has been rapid and different. Apart from traditional banks, Visa, Mastercard and Paypal the US and to the same degree Europe was wide open. In Asia there are a million and one start ups and also serious players disrupting the payment world from AliPay, to WeChat pay to Stripe to Ant financial etc.

Also the role that cash plays in these markets is far more important than in the US. Part of the reason Ali Baba is killing Amazon in Asia apart from Amazon’s too little too late effort is because Ali Baba/Lazada does cash on delivery.

Don’t get me wrong, I like and hold Square and can’t wait for them to take on international markets along with Shopify but the landscape is completely different.




My quick take is that there are two use cases here. The cash on delivery is very attractive to the consumer, particularly for e-commerce. For example, I needed a couple of temperature controllers and was able to order from Lazada on a cash on delivery basis. I didn’t have to worry about 1) using my credit card, 2) having the seller have my money while I hoped for a delivery (drop shipped, I’m sure, plus the item turned out to be out-of-stock), and of course these were additional to the advantage of not having to go to a dozen little hardware stores trying to find the item (of course I didn’t actually find the item online either–other than the picture and specs).

But for the small shop, would it be a little more attractive. Not if the vast majority of customers are dealing in cash. We deal 90%+ in cash for purchases. Credit cards are useful in the malls, but much less so in the small shops (out in the provinces, large cities could be different). And the banks are just difficult to work with (crowded, slow service…) We do have a local credit card but lots of people don’t trust the automatic payment from checking account and the process to establish it…, awful. And, if use $-based credit card they tack on exchange rate fees. But, I think the use of cash will decline and will trickle down from the larger stores to the smaller. Not sure. One thing is that inventory control, or lack of, results in out-of-stock. I think lots of goods held on consignment type arrangements. There is a need, but is Square the solution? I need to think about this a little more. I think about the 7-11’s and Dunkin’ Donuts; and the little shoe stores in malls. Hmmm.


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