Square is finally seeing a light at the end of the tunnel from its difficult partnership with Starbucks.

Starbucks accounted for only a trickle of Square’s net revenue of $451.9 million for the quarter ended Dec. 31, 2016, as the payments startup moves past the effects of ending a major processing deal with the coffee giant in 2015, Square announced during its earnings conference call.

Overall, Square posted a $15.2 million loss for the fourth quarter, narrowing the gap from its $80.5 million loss during the same period a year ago, and revenues rose 21% during the quarter, providing the first good look at Square’s momentum in its post-Starbucks era.

Square CEO Jack Dorsey
Square CEO Jack Dorsey Bloomberg News

Square’s processing volume rose 34% during the fourth quarter to $13.7 billion, up 34% from the same period a year ago, with larger retailers steadily adding to the company’s payment volume momentum, Sarah Friar, Square’s chief financial officer, told analysts during a Feb. 22 conference call.

Square Capital, the company’s lending arm, also continues to grow, Friar said. More than 40,000 loans, totaling $248 million, were approved during the fourth quarter, up 68% over a year earlier. The default rate on those loans is about 4%, according to Square.

Word of mouth continues to be the strongest driver of Square’s core payment processing business, but awareness of Square’s ancillary services including loans, payroll and customer loyalty solutions is still lacking, said Square CEO Jack Dorsey during the conference.

“One of the things we hear a lot is that sellers just aren’t aware of the services we’re providing,” Dorsey told analysts, vowing to continue investing in multi-channel marketing for all of Square’s services.

Shifting distribution to independent service organizations (ISOs) still isn’t on the horizon, Dorsey said. “We haven’t found a reason to go to new channels like ISOs, but we’re always open to it.”

To control expenses, Square also plans this year to ramp up its use of machine learning and automation to manage risk on loans through Square Capital, Dorsey added.


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