Square focusing on underbanked merchants, consumers

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Square Inc.’s lending business is booming, but Chief Executive Officer Jack Dorsey said that rather than competing with banks, his company is focused on offering traditional banking services to more merchants and consumers who might not have easy access to them.

"We’re not really competing with financial institutions and banks and traditional lenders. Our average loan size is $6,000, so we’re competing with people going to their friends and family and asking for a loan," Dorsey said in an interview with Bloomberg TV’s Emily Chang. "That’s a massive market."

Square Capital, the company’s lending division, facilitated more than 49,000 business loans for a total of $318 million in the second quarter, Square said earlier Wednesday. Most of the merchants taking loans from Square are stores and restaurants that need the extra capital to open a new location, buy inventory or fund day-to-day operations. The lending business grew 68 percent and added new investors, including the Canada Pension Plan Investment Board.

The growth at Square Capital helped buoy the company’s sales and profit, which surpassed analysts’ estimates. Square’s shares have almost doubled this year on increasing confidence in its offering for merchants, which can get hardware and software services like employee management systems and loans from one provider instead of many.

Dorsey, who also runs Twitter Inc., has his sights on individual consumers as well.

"With Square Cash we are reaching an underserved and an underbanked" population, he said. The company’s Square Cash app lets users to store money and send peer-to-peer payments without having to connect a bank account. It recently rolled out a physical card to let consumers keep cash on its platform and spend directly from Square Cash.

In response to a question about the increasing number of public reports of harassment and discrimination in the tech industry, Dorsey said every company needs to pay more attention to inclusion.

"I would urge us and everyone in our industry, and broader -- in every company and organization -- to think about, how are we retaining people? How are we giving a sense of belonging?" Dorsey said. "Then we can do a lot more work around enabling people to come in and they’ll want to stick around and they’ll want to continue to contribute and build."

Earlier this year, in Square’s first diversity report, the San Francisco-based company said it was focused on improving hiring and sourcing processes to increase diversity. Women make up 45 percent of its executive team, Square said, while overall 63 percent of its employees globally are men.

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