At the close of last month, Square Inc. rolled out its plans to begin extending credit to buyers who make large purchases to specific merchants. The strategy is part of the firm’s unrelenting efforts to earn revenue from other resources other than the normal payment processing.
The FinTech company will be launching new Installment packages for clients making purchases worth $250 to $10,000 at any Square seller that the organization chooses fit for the credit program. Customers will be able to submit applications for Square loans through their smartphones from anywhere and only have to show a virtual card when making payments so that their financial data remain undisclosed.
What’s more, customers will pay for their purchases in fixed installments within three, six, or twelve months. Shoppers who choose auto-pay and pick the 3-month option during the Square loan application process will enjoy 0% APR.
According to Square CFO, the company is confident it can approach the “biggest businesses in the world.”
Square’s Lending platform’s head Jackie Reses said that the credit option would fill the gap the company has seen across the different types of sellers.
“We realized the many high-ticket purchases buyers make on Square and retailers were afraid they might begin missing sales…” said Reses.
Square also has other financing plans with “significant minimums” for retailers willing to try their services, plus a cap for annual year revenue or the number of transactions processed. However, square doesn’t have a minimum cap for merchants using the Installment options.
It should also remain clear that this offering isn’t Square’s first attempt to venture into credit services. The company also runs Square Capital, a lending program for merchants with low and high risk accounts.
Square plans to use machine learning to verify the creditworthiness of sellers, going through their credit reports as well as other data that indicate “willingness and ability to pay.”
Counterpart PayPal Holdings Inc. also ran a comparable shopper-credit offering, before it completely sold it out to Synchrony Financial at the start of this year. PayPal’s decision to sell the business came after it perceived it an “overhang on the firm’s shares” because it added to the organization’s credit risk.
Shares went up soon after the Synchrony Financial deal was made public last November. This year, Square shares have gained 180%, while Synchrony Financial has increased by 9%.
The idea is well thought out. Hopefully, Square’s new plan to extend credits will benefit both shoppers and sellers.
Author bio:Electronic payments expert Blair Thomas is the co-founder of high-risk payment processing company eMerchantBroker. His job includes helping merchants secure high risk accounts. He’s just as passionate about his business as he is with traveling and spending time with his dog Cooper.