? Square's new direction of development (SQ), The Cash app counts on the role of the world's leading provider of cash services for customers. Cash App – it is a mobile payment service, which was developed by Square, Inc., which allows users to transfer funds to each other using a cell phone app.
? Revenue by results 2 kV 2020 amounted to $1.2 billion, gross income $281 million, having increased year-on-year by 361% And 167% hence.
? If Cash App manages to monetize twenty percent of its US user base at the level of conventional banks, then, with a moderate growth in sales, SQ can bring nineteen percent per annum over the next 5 years, increasing from $186 to $375 to 2025 year.
?In the model below
Square score and assumptions
? TO 2025 Cash App plans to monetize twenty percent 75 million monthly active users (MAU), after another twenty percent of "secondary" MAUs, twice smaller.
Square Does Not Monetize The Remaining Sixty Percent Of MAU Cash App.
Branch Square, which is engaged in lending to small businesses, Square Capital, increases the percentage of gross payments (GPV) from two percent to 2019 year up to four percent to 2025 year.
The rest of Square's services are expected to grow around nineteen percent a year, in other words, at a similar pace, as well as proceeds from operations to 2025 of the year.
? Cash App: possible bank. The Cash app has changed significantly since its inception at Square's hackathon 2013 year, as shown below. Now Cash App provides users with services of credit institutions, Deposits, debit cards, access to bank terminals, a platform for investing in stocks and bitcoins, rewards program, free transfers from the United States of America to England and integration with Square merchants. Foreseen, that Cash App will provide a range of services of ordinary banks, including personal loans, credit cards, mortgage and insurance. Besides, as an all-encompassing digital wallet, which includes the eco-system of the Square merchant, Cash App can integrate offline and online trading, unlike rival banks.
? Average per 1 active digital client Wells Fargo, JP Morgan Chase and Bank of America receive $880 dollars a year, most of the interest income.
? For that purpose, to get closer to this level of monetization, Cash App should solve three problems:
1) launch and earnings of new goods,
2) become the premier provider of monetary services to users, and
3) maybe, most important, serve higher income demographic groups.
? Cash App encourages consumers to use deposits with significant discounts on goods and services, as well as lower interest rates on loans. Square can use its seller base as a channel for acquiring new users of the Cash app, offering loyalty through the Cash app, allowing Square sellers to use Boost as an advertising platform or facilitating feedback transactions between Cash App users and the Square seller at a lower cost for sellers, than standard credit card processing-> encourages sellers to convince buyers to make transactions through the Cash App.
? +Cash App uses innovative marketing strategies to attract new customers from all demographics in the US. A disproportionately large percentage of search queries in Google early development of Cash App was in the US South, states with high rates of non-banking and underbanking. However, in 2019 And 2020 Over the years, search activity of the Cash App has grown significantly in other states, which indicates an increase in the number of users in higher income demographics.
? When deciding 3 Tasks, as indicated above, Cash App will increase the average revenue per user by 49% (ARPU) at an average annual rate over the next five years, with $25 last year to $260 dollars to 2025 year. With 2016 on 2019 a year with only two main sources of income – instant deposit and cash card – its ARPU increased by 82% per year from $2,2 to $25.
? Pictured below 10 Cash App monetization scenarios. Cash App users are divided into 3 group:
1️⃣ main users of Cash App, who monetize ARPU (average income per user) at the bank level = $880;
2️⃣ secondary users, which monetize half as much, or $440;
3️⃣ non-monetized users, who only use free Cash App products.
⚠️Predicted Square stock price significantly depends on the level of Cash App monetization. If primary and secondary users will monetize software 30% instead of 20%, target price will approach $500, only 10% monetization will lead Square to $250 dollars per share to 2025 year.
? It is important to note, that Venmo and Cash App users have a financial incentive to invite their parents, grandparents on platforms, which was not there when Facebook and Instagram were launched. Furthermore, to avoid unpleasant interactions a few months after splitting expenses after a night in the city, family and friends can lure users back to Venmo, Cash App and other P2P platforms, requesting a long grace period is Square's advantage.
Shopping business Square: profitable proposition
? Later 10 Years After Launching Revolutionary Credit Card Reader, Square Still Has The Best Value For Sellers. While credit cards have become a commodity in recent 10 years, Square focused on, to enable the business to grow with a suite of software services and access to working capital.
? Similar to the Impact of the Cash App Network on the Consumer Side of the Equation, software services, seem to be, increased retention of sellers, which is measured by Square's positive gross margin retention. According to a Jefferies poll in 2019 year, Square Payroll is the 2nd most popular payroll software for US SMEs, second only to Intuit's QuickBooks. As a result, Square could double its penetration of universal card purchases in the United States with 2,7% in 2019 year before 5,5%, increasing transaction revenues by 19% per year for the next five years. The same way, Square Capital's raw data could double with 2% from total sales to 4%. COVID-19 has closed many retail outlets, but the payroll protection plan introduced Square's lending opportunities to thousands of new sellers.
? At some point, Square will be able to facilitate transactions between its merchants and Cash App users., eliminating third party intermediation and optimizing the economy. Square pays commissions today, including exchange, appraisal, processing and bank settlements, various third parties. When one of her sellers accepts payment of $50 Dollars, Square charges $1,47, or 2,95%, but leaves only $0,50 dollar or 1% from the purchase price as net profit. Had it gotten rid of middlemen and made it easier to pay directly between merchants and Cash App users, Square could leave prices unchanged and nearly triple its net interest rate, or cut prices and undermine the competition.. In the latter scenario, Square sellers will have an incentive to maximize the number of Cash App transactions and minimize the number of other card transactions., actually becoming sales agents for the Cash App. Square could motivate them to become Cash App Sales Agents with access to the ad platform and millions of consumers with daily discounts through Boosts.
? At some point, Square may integrate the Square Online Store with the Cash app, allowing Cash App users to search and buy items from a Square seller, as well as the Shopify Shop app. If successful, Square could charge sellers to advertise their products on Boost or search results, similar to sponsored brands Amazon. Ultimately Cash App could create an e-commerce platform and generate many new revenue streams.
