Square is accelerating its integration with third parties to save the time and resources it would take to develop the business technology it needs to stay competitive in an increasingly sophisticated and crowded mobile payments marketplace.

"Given that competitors in the small to medium business space, such as ShopKeep and NCR Silver, offer far more robust capabilities, Square is forced to play catch-up," says Jordan McKee, an analyst at Yankee Group, who says Square's partnership program is a response to those competitive pressures.

Square's new partner platform is an extension of Works with Square, a program that allows developers to build accessories for Square businesses. Its initial partnerships mostly focus on accounting, including an integration announced today with Xero's accounting software.

Square has also integrated its technology with Intuit's QuickBooks and with freee, an accounting software company based in Japan. The Xero and QuickBooks Online integrations are free, and the QuickBooks Desktop integration requires a QuickBooks app that costs $3.99 per year. Square does not charge recurring fees for access to third party software.

"If you're looking to get into a specific market, such as the small to medium business segment, integration with third parties is a gold standard. It's a great way to go," says Brian Riley, a research director with CEB TowerGroup.

While there may be competitive overlap in some cases, such as between Square and Intuit (which provides a Square-like card reader called GoPayment), the ultimate goal is to drive use among larger merchants, Riley says.  "[Square's] integration program … makes it easier [for merchants] to have a portable point of sale system while knowing their accounting will be taken care of," Riley says.

The partnership program allows Square to nimbly respond to merchants' demands, says KC Simon, a Square spokesperson. 

"There are a number of different kinds of businesses using Square, and everyone has a unique need," Simon says. "By partnering with third parties we can not only get these business tools for merchants out there, but meet specific needs."

The partner platform is part of a larger menu of products that Square has introduced and updated over the past couple of years as it attempts to extend its reach beyond micro merchants. Other services include the Square Register software and Square Stand hardware; an analytics dashboard; the Square Market online storefront and Square Wallet. Square has also updated its flagship mobile card reader to make it more accurate and more durable.

"It's becoming very clear that [Square's] future opportunity is not with low-volume micro merchants," McKee says. "A continued focus on dog walkers and baby sitters will inevitably drive Square out of business. Instead, it must direct efforts towards signing on small to medium-sized business, which provide more sustainable revenue streams."

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