Here’s what Jack Dorsey said yesterday:
One of the drivers of our results is our work on automation, which I mentioned is an area of increased focus for us this year. Automation has always been a core differentiator for us. We’ve used machine learning and data science to manage risk since the beginning of Square. We’re constantly looking for ways to make our services more automated and more self-serve and machine learning is perfect for that. This focus has allowed us to achieve several objectives.
First, automation allows us to give more people access to the financial system. More than 90% of sellers are automatically approved and self-onboard to process payments, and we’re able to onboard individuals to Square Cash with just a zip code and an e-mail address or phone number. We’ve extended this approach to risk management in Square Capital to provide financing to the underserved…
Second, automation helps us scale as we grow. For example, we currently automate risk assessment for more than 99.95% of transactions. We’re also able to make improvements to our manual handling; our fraud models have already allowed us to resolve 40% more cases every week, compared to beginning of the year.
And third, automation allows us to help our sellers grow. You can see this in our unique suite of CRM tools. We leverage our deep understanding of the customer to build marketing and loyalty programs that are easy to use, measurable and effective. Our loyalty programs are tracked and managed by Square point-of-sale and our technology automatically recommends programs optimized for the seller’s particular business.
We’ve created something new and powerful, on average Square marketing programs generate more than $10 in sales by our sellers for every $1 in spend.
Here’s Sarah Friar (SQ CFO) in response to a question to an analyst asking why the take rate for larger merchants is just as high as that of small businesses.
it’s large sellers actually largely self-onboard. So, just like small and micro sellers, they come to the website, they’ve heard of Square, and they are able to get on-boarded and use our managed payments in minutes.
They’re continuing to build a system that attracts customers and allows them to get onboard with zero or minimal human intervention from SQ.
SHOP: how do they get new customers? Here’s Harley Finkelstein (COO) on the earnings call:
We now have more than 13,000 partners who have referred merchants to Shopify in the last 12 months, up from 12,000 just last quarter. This ecosystem has been a steady source of new merchants to Shopify and our third strongest acquisition channel behind organic traffic and paid marketing.
How SQ and SHOP get new customers is a critical factor in how they get new customers. Organic traffic is SHOP’s largest source of getting new customers. Wow! That’s completely free. Paid marketing is second and is also very cheap. Third is their partner network. This is why merchants are flocking to SHOP in increasing numbers. They are coming in the door without SHOP having to find them. The same is happening with SQ.
Contrast this to MULE and BL. They spends months to a year trying to convince a customer to join. Then they take up to a year to implement a customized solution that requires highly trained engineers to achieve. This process is slow and has several scaling limitations due to limiting resources (e.g. having enough sales people and trained engineers onboard).