Square combines services to address the modern acquiring market

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Square is adding to its menu of services just as long-established competitors embed expanding payments technology into their own product mix.

The San Francisco-based Square on Tuesday said it would make Square for Retail available on Square Register. This move is designed to make it easier for merchants to sync items, inventory, prices and data with different payments hardware and software.

The combo addresses a trend toward embedding payments more seamlessly into other workflows for the merchant, while consumers shop, receive communications from merchants and pay through a single repeatable experience.

Square hopes to combine functions such as letting consumers see purchases and make payments on a screen, while sellers avoid onboarding and other complicated retail workflows. A Square spokesperson called the launch a “hardware/software” product focused on unique needs of retail-specific businesses.

"Payment acceptance is no longer the primary focus for payment service provides," said Krista Tedder, head of payments at Javelin Strategy & Research, adding Square was risking loss of market share had it not launched a retail solution of this nature. "What businesses need are the tools that enable easy management of inventory, invoices, sales, marketing, and being able to seamlessly add payments to all aspects of the functions needed to grow a business."

Square has added myriad products as it moves beyond its genesis as a firm that allows micro-merchants to accept card payments. Square's strategy involves the development of products that can build off of its payments flows, such as merchant lending and some consumer-facing services. It also supports broader needs for businesses that are still relatively small, but larger than micro-merchants.

In 2019 Square introduced new application programming interfaces and software development kits that allow third parties to support business functions beyond payments.

Square has additionally made other moves that would allow it to tie more banking services to its payment products. The company has added new markets in the past year to Square Terminal, extending support for NFC contactless payments, and it has patented a system that could make it easier for merchants to accept cryptocurrency while mitigating volatility risk. On the consumer side, Square has made progress with its Cash P2P app.

Square Register is about three years old, and since that time merchant acquiring has evolved.

Stripe expanded and has added merchant capital and security as its valuation passed $35 billion. Stripe, Square and other fintechs have sparked a response from the traditional merchant acquirers, which combined with bank technology companies in a flurry of deals in the past year. The result is these companies can approach merchants with a larger, more digital and flexible set of products from a single source.

For example, Fiserv’s deal to acquire First Data brought Clover into Fiserv’s fold. Clover, First Data’s tablet point of sale system, played a role in First Data’s growth beyond payment acceptance, enabling First Data — and now Fiserv — to promote “future proofing” as part of its pitch to growing retailers.

Clover has sparked competitive moves from other acquirers. TSYS debuted Vital to counter Square and Clover early in 2019. TSYS later merged with Global Payments, adding to Vital’s addressable market and increasing the product bundle.

“There’s been an increased focus on midsize business from both the larger acquirer/processors essentially going downmarket into the traditional ISO turf, as well as moves upmarket from Square, who initially focused on micro-merchants,” said Thad Peterson, a senior analyst at Aite, adding Square has an opportunity to capitalized on is focus on small businesses and its existing array of services to increase penetration in the midsize portion of the small-to-midsize business market.

“The fully integrated Square offering appears to be going after products like Clover from First Data/Fiserv, which has been getting good penetration in this category," Peterson said.

Square's combo is essential for them to compete with Global Payments and Fiserv, Tedder said. "Both large processors provide user friendly, intuitive tools to manage a small business."

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Alternative acquirers Acquirers Point-of-sale Retailers Square