http://www.investors.com/research/the-new-america/...-financial-tech/Square recently revealed that it plans to create a banking arm to offer business loans, take deposits and provide other services. It already offers small loans through its Square Capital unit.
"The premise is small businesses don't have access to capital to start, run and grow their business," Chief Financial Officer Sarah Friar said. "Our typical loan type is about $6,000. This is not a playground that the banks typically can serve in any sort of profitable way. So we felt there was a market need."
It's all part of Square's master plan to continue serving the often neglected small business market, as well as to move upmarket to larger businesses.
Square's rivals, mostly traditional payments firms, have tried undercutting it on price, but customers appear to be sticking with Square, according to a recent survey by KeyBanc. Among the larger businesses that Square serves — those doing more than $200,000 in annual sales — 60% have received lower-price offers from Square's competitors, Beck said. But 80% say that they plan to stay with Square for more than a year.
Goldman Sachs analyst James Schneider sees Square continuing to grow its user base and to sell them more services. He rates Square as buy. "We expect the company to achieve significant growth driven by further growth in payment processing, and bolstered by cross-selling subscription and service-based products to its base of nearly 3 million merchants," Schneider said in a Sept. 11 report. "We believe Square can continue to drive margins higher as it builds scale outside payments."
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