Earlier this month, Square kicked off 2019 by launching Square Card. It’s a B2B play: a free MasterCard debit card that lets Square merchants make purchases with money from their Square accounts.
That may not sound like a very sexy new product, but analysts and the market are impressed. Square stock is up 36% in January while many other tech stocks have flailed. And Nomura Instinet analyst Dan Dolev, in a Jan. 24 note, raves that the Square Card “kills several birds with one stone.” He sees it as a $50 billion opportunity for Square (in gross payment volume) down the line.
So, what’s so exciting about a business debit card?
For starters, it gives small businesses instant cash flow. Money from a customer sale is instantly usable for business expenses through the debit card. The card also carries a flashy 2.75% cash-back reward on purchases made at other Square merchants. (2.75% is the same fee Square charges merchants per credit card swipe.)
Clearly, Square applied lessons learned from its Cash Card, a Visa debit card for users to spend their Cash App balance; that card carries “Boosts,” which are discounts at mainstream chains like Starbucks and Chipotle that cardholders can swap out with a swipe.
Square Card also cuts out the middle man: there is no bank issuer, no bank account needed since the funds are funneled from the business’s Square balance.
In other words, the card addresses some of the very use cases that led us to name Square our Yahoo Finance Company of the Year in 2018: catering to businesses; improving the point-of-sale experience for both seller and customer; and helping the unbanked and underbanked.
As Dolev of Nomura writes, the card addresses “the multitrillion-dollar underpenetrated B2B commerce market, of which just 4% is carded.” It also “reinforces the ecosystem by incentivizing sellers to transact with one another.” Indeed, the “ecosystem” is a notion that Square’s top executives constantly mention. As a Jan. 22 Baird note highlights, SMBs (small and medium-sized businesses) can view sales records and purchase activity from the card all in their Square dashboard, further solidifying the ecosystem.
And finally, most notable of all in terms of Square’s long-term vision, Dolev writes that the card “deepens SQ’s disintermediation of banks.”
Daniel Roberts is a senior writer at Yahoo Finance. Follow him on Twitter at @readDanwrite.