Square (NYSE: SQ) afresh alien Square Terminal, a carriageable all-in-one acquittal processing accessory advised to replace keypad-based acclaim agenda machines. The wireless, Wi-Fi-enabled accessory processes payments from acceptable cards and NFC platforms like Apple Pay and Alphabet’s Google Pay, and uses a congenital printer to book receipts.
Square will allegation a transaction fee of 2.6% additional ten cents per acquittal on Terminal, which is commensurable to the ante on its added accouterments devices, which allegation fees amid 2.5% and 2.75% additional ten cents per transaction. The Square Terminal costs $399, but it comes with a $300 acclaim for merchants.
Square Terminal. Image source: Square.
Square’s aboriginal accouterments artefact was the Square Reader, a acclaim agenda account dongle that could be acquainted into a smartphone. The accessory was after adapted into a stand-alone Reader that could additionally acquire NFC (i.e. contactless) payments. Square additionally launched the Square Stand, which adapted iPads into point-of-sale systems, and the Square Register, which acquired the abstraction into an all-in-one arrangement after the iPad.
The Square Terminal shrinks bottomward the Register into a carriageable anatomy factor, which frees merchants from checkout counters — which is ideal for assertive employees, like hairdressers. All these articles binding merchants to Square’s accretion ecosystem of services, which includes payments, chump accord administration tools, amount services, HR and account administration tools, e-commerce and web architecture tools, burning deposits, baby business loans, and alike aliment deliveries via Caviar.
Square’s primary action is to lock in merchants by cross-selling added of those services, which could about-face it into an “one-stop shop” for digitizing a business. Doing so would widen its moat adjoin PayPal (NASDAQ: PYPL), and advice it claiming added “one-stop” agenda shops like Shopify and Grubhub.
Square Register. Image source: Square.
Square’s accouterments acquirement rose 78% annually to $18.4 actor aftermost quarter, fueled by able appeal for its Reader, Stand, and Register devices. However, that absolute accounted for beneath than 5% of Square’s absolute adapted revenues. Most of Square’s revenues came from its acquittal fees and subscriptions for its add-on services.
That’s why Square sells its accouterments accessories at a loss. Aftermost division its accouterments costs rose 80% annually to $25.5 million, and exceeded the unit’s revenues by 37%. That loss-leading action will abide with the Terminal, which technically alone costs $99 net of $300 in credit. That makes it abundant cheaper than the Stand and Register, which amount $169 and $999, respectively.
Square’s capital adversary in the amplitude is PayPal, which offers four types of hardware: the Chip and Swipe Reader, the Chip and Tap Reader, the Chip Agenda Reader, and the Mobile Agenda Reader. PayPal’s aboriginal two Readers attempt adjoin Square’s Contactless and Chip Reader, while its Mobile Agenda Reader competes adjoin Square’s archetypal dongle-based Reader.
Meanwhile, Square’s Terminal seems “squarely” aimed at PayPal’s Chip Agenda Reader, which offers agnate appearance but uses a concrete keypad and lacks an onboard printer. These two key differences could win over merchants, back the Terminal can affectation added advice on its full-color touchscreen and doesn’t charge to be tethered to a cancellation printer.
PayPal’s Chip Agenda Reader alone costs $100, but Square acceptable thinks that the Terminal’s arranged acclaim could accomplish it a acute alternative.
Square sees a adventitious to agitate the bazaar for keypad-based acclaim agenda processing systems with Terminal, and its bet could pay off over the continued term. However, investors should agenda that Square is apparently incurring losses for every accessory sold, and that its ultimate ambition is to accomplish college cable and account revenues from merchants instead of authoritative money from accouterments sales.
Added From The Motley Fool
Suzanne Frey, an controlling at Alphabet, is a affiliate of The Motley Fool’s lath of directors. Leo Sun owns shares of Apple, Grubhub, and Square. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, PayPal Holdings, Shopify, and Square. The Motley Fool has the afterward options: continued January 2020 $150 calls on Apple, abbreviate January 2020 $155 calls on Apple, abbreviate January 2019 $82 calls on PayPal Holdings, and abbreviate January 2019 $80 calls on Square. The Motley Fool has a acknowledgment policy.
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