Square Teams With Software Startups to Hook in More Businesses

Square Spreads Electronic-Payments via Software Startups
  • Company accesses larger retailers beyond own payment service
  • Agreements are with Vend, TouchBistro point-of-sale providers

Square Inc. unveiled deals with software startups Vend and TouchBistro, the latest partnerships that will offer its products to larger businesses that aren’t already customers of its electronic-payments system.

Vend provides point-of-sale software for more than 15,000 retailers, while TouchBistro has specialized point-of-sale software for restaurants in more than 35 countries. Merchants previously had to stitch together hardware and services from different providers. The agreements announced Monday will let these companies use Square’s payments and business-management services on top of their Vend or TouchBistro point-of-sale systems.

“In the last two to three years there’s been a clear intent and signal to the market that we’re becoming a more and more open platform,’ said Francoise Brougher, Square’s business lead and a former Google executive. “Sellers are using many different products and we want to respect their workflow, but make sure we are in the flow of the tools they use.”

The deals with Vend and TouchBistro give Square access to larger businesses that handle more transactions and offer more opportunities to make larger loans and provide additional services.

Square started by selling smartphone plug-ins to let food truck vendors and other small businesses accept credit card payments. Now it also provides loans and tools for managing inventory and analyzing sales. The payments-processor has been gradually offering services to merchants using other systems. Earlier this month, it joined with Upserve to make loans available to customers of the restaurant technology startup.

Chief Executive Officer Jack Dorsey has been trying to convince investors that Square can grow amid stiffening competition in the crowded electronic-transactions industry. The company’s stock has gained 15 percent since raising its forecast on Aug. 3 in a move that gave investors confidence that Square can drive profitable growth.

Wider Potential Network

Brougher said the intent isn’t to switch Vend and TouchBistro merchants to Square’s point-of-sale service because those sellers have already built their business processes around the other systems. Vend and TouchBistro also have specialized services for particular industries that Square doesn’t provide.

Instead, Square is interested in more volume. Brougher said that on average the retailers using Vend are processing more money in a year than Square’s customers. Earlier this month, Square reported a 61 percent increase in payments transacted from larger sellers, which the company defines as those that handle more than $125,000 in annualized gross payments.

Partnerships allow Square to build relationships with businesses, such as restaurants, that it may have had trouble reaching before, said Neil Doshi, an analyst at Mizuho Securities USA. The downside is that Square may collect less in fees if it needs to give a cut to partners, he said. Brougher declined to comment on the financial details of the partnerships. Square usually takes a 2.75 percent fee from transactions.

“The biggest concern would be what’s the financial relationship?” Doshi said. “How much take rate are they giving to these partners? If Square does more and more partnerships, how much of an impact will it have on their overall transactions margins?”

Brougher said the point-of-sale market is extremely fragmented, and that Square has built a system that’s better off in partnerships.

“All these partnerships are intended to grow Square’s footprint,” Brougher said.

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