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Business Operations Business Models

How Does Square Make Money (Business and Revenue Model)

The Square business model

How Does Square Make Money?
Here’s what you should know:
  • What is Square, and how does it work?
  • How does Square make money?
  • Processing Fees (Square Payments)
  • Cash App
  • Selling & Renting Hardware (For POS Services)
  • Square Capital (Business Loans)
  • Online Store (Square Online)
  • Add-Ons
  • Product Photography (Square Photo Studio)
  • Square Appointments
  • Gift Cards
  • Square Payroll
  • Square’s Subsidiaries, Acquisitions, and Exits
  • Square’s profit and revenue
  • What is the Square business and revenue model?
  • Square’s funding and valuation

How does Square make money? Here is a full, in-depth, breakdown of their ten (10) revenue streams and the different products and services they offer, as well as the Square business model, their year-over-year revenue, and how Square works.

What is Square, and how does it work?

Square provides financial services through what started as payment processing for Point of Sale (POS) transactions. From there, it has evolved itself into a one-stop shop for small business owners – offering services from business loans to product photography to employee payroll.

Founded in 2009 by Jack Dorsey and Jim McKelvey, Square has since become one of the leaders in Point of Sale (POS) payment processing with over 2 million business merchants giving them roughly a 53% market share in the POS-systems market and over a $100 billion valuation.

How does Square make money?

Between their 36 million monthly users on Cash App and more than 2 million business merchants using their Point of Sale (PoS) systems to process transactions, Square has over 38 million customers.

In addition, Square also processed $106.2 billion in Gross Payment Volume (GPV) in 2019 with a reported 53% market share in the POS-systems market.

So, how much money is Square making off Cash App, the $106.2 billion in gross payment volume, and all their other services offered?

Below is a detailed breakdown of Square’s revenue model. Breaking down how they make money and how much they charge for each service offered.

Here are the 10 ways of how Square makes money (in 2021):

Square generates revenue for the company in ten (10) ways.

#1. Processing Fees (Square Payments)

One of Square’s main sources of revenue comes from processing fees through what Square calls, Square Payments.

In 2019, Square processed $106.2 billion in Gross Payment Volume (GPV) from nearly 2.3 billion card payments from 407 million cards. Of which, Square is getting a processing fee for each transaction.

Square Processing Fees:

  • In-person payments (POS): 2.6% + $0.10 per transaction
  • Online payments: 2.9% + $0.30 per transaction
  • Manually entered payments: 3.5% + $0.15 per transaction
Square Payments | Square Processing Fees
Source: Square

#2. Cash App

Square developed and launched Cash App (formally known as Square Cash) in October 2013.

In 2020, Cash App’s revenue accounted for 62% ($5.9 billion) of Square’s total revenue of $9.5 billion.

Note: 62% of Square’s total revenue comes from Cash App.

#3. Selling & Renting Hardware (For POS Services)

According to reports, Square currently dominates the point of sale (POS) market with a roughly 53% market share. While their online payment system, Square Payments, only has about a 2.3% market share of all live websites.

You can purchase the hardware from Square or rent it through their partnership with Fello, who fulfills all of their rental equipment orders.

Square Hardware Cost:

  • Purchase: $10 to $799 per product
  • Rent: $5 to $235 per year plus 2.9% + $0.30 per product (for a 4-day rental, and it’s a 21% rental item increase thereafter)
How Does Square Make Money? | Square Business Model
Source: Square

#4. Square Capital (Business Loans)

In March 2021, Square entered into the merchant lending space by creating its own industrial bank, Square Financial Services, a subsidiary of Square Inc.

The way it works is: Square Capital offers business loans for square merchants ranging between $300 to $100,000. Once approved, merchants pay a one-time-only loan fee, also known as an origination fee. The loan repayment rate is based on the company’s sales volume, interest free.

Most origination fees are typically 0.5% to 1% of the loan amount. So Square is making up for the interest-free loans by increasing the origination fee of the loan by about 9.5% to 15%.

Loan Origination Fee:

  • 10% to 16% of the loan
Square Capital
Source: Square

Note: Square Capital is similar to Stripe Capital, which offers the same type of business loan structure – no interest, similar repayment terms, etc.

[ Related Article: How Does Stripe Make Money? ]

#5. Online Store (Square Online)

Square also extends its services past just processing payments. They also integrate their payments system with Square Online – which operates much like a Wix or Shopify – to get you up and selling online quickly.

Square Online Cost:

  • Free: 2.9% + $0.30 per transaction
  • Professional: $144 per year plus 2.9% + $0.30 per transaction
  • Performance: $312 per year plus 2.9% + $0.30 per transaction
  • Professional: $864 per year plus 2.6% + $0.30 per transaction
Source: Square

#6. Add-Ons

Square has a few add-on services for customers already using Square Online or Square’s PoS hardware. They are:

Square Marketing: $15 to $425+ per month.

SMS Marketing: $10 to $125+ per month.

Square Loyalty: $45 to $105+ per month, per location.

Virtual Terminal: 2.6% + $0.10 to 3.5% + $0.15 per typed-in transaction.

Square KDS: free to $60+ per month, per location.

Note: These add-ons are only available to Square Online or Hardware customers and is a good example of an upselling/cross-selling business model.

#7. Product Photography (Square Photo Studio)

Another service Square offers is product photography. And unlike most of Square’s other services, you do not need to be a Square customer to use their Photo Studio.

Square Photo Studio Cost:

  • Photo Pack: $9.95
  • 360 Photo: $29.95
Square Photo Studio
Source: Square

#8. Square Appointments

Tailored for businesses that require bookings and appointments – Square Appointments is an easy way for businesses to simplify the booking process.

Square Appointments Cost:

  • 1 staff calendar: 2.6% + $0.10 per transaction
  • 2-5 staff calendars: $50 per month plus 2.5% + $0.10 per transaction
  • 6-10 staff calendars: $90 per month plus 2.5% + $0.10 per transaction
  • 11+ staff calendars: custom pricing

#9. Gift Cards

Purchase gift cards for your business through Square. With the option of integrating digital gift cards on your website or purchase physical cards for in store.

Gift Cards Cost:

  • Digital eGift Cards: 2.9% + $0.30 processing fee
  • Starter Packs: $40 per pack
  • Quick Cards: from $0.95 per card
  • Custom Cards: from $0.80 per card
Gift Cards
Source: Square

#10. Square Payroll

Last but not least, Square also simplifies payroll for small businesses by offering a payroll payment system, automated tax filings, and employee benefits – all wrapped into one.

Square Payroll Cost:

  • Pay Contractors Only: $5/month per person paid
  • Pay Employees & Contractors: $29/month + $5/month per person paid

Square’s Subsidiaries, Acquisitions, and Exits

To date, Square has made a total of 19 acquisitions, including its most recent of TIDAL and Credit Karma Tax acquisitions. To add to that, Square also has made 16 investments, 2 lead investments, and 3 successful exits.

Square's Mergers and Acquisitions
Source: Crunchbase

Square’s profit and revenue

In 2020, Square reported $9.5 billion in revenue and $2.73 billion in gross profit.

Note: Because Square, Inc. is a publicly-traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of Square’s publicly released financial reporting through their annual reports.

What is the Square business and revenue model?

Square makes money through a few revenue models that they combine within their company, they are:

  • Infrastructure as a service (IaaS) business model
  • Fee-for-service (FFS) business model
  • Pay-per-use business model
  • Transaction-based revenue model
  • Freemium (upselling) business model
  • Interest business model
  • Mergers & acquisitions (M&A) revenue model
  • B2B2C (partnerships) business model
  • Business-to-business (B2B) business model

Square’s funding and valuation

According to Square’s Crunchbase profile, Square has raised $590.5 million over 10 rounds with a valuation of $101.11 billion.