Dorsey’s Square Plans Bitcoin-Focused Platform. Square Is the ‘Bank of the Future,’ One Analyst Says.
Jack Dorsey, co-founder and CEO of Twitter and Square, at the Bitcoin 2021 conference in Miami on June 4, 2021.
Eva Marie Uzcategui/Bloomberg
Digital-payments company Square plans to build a platform for decentralized financial services, according to CEO and founder Jack Dorsey. Analysts at Mizuho called Square the “bank of the future” earlier this week, and reiterated a Buy rating for the stock.
Square (ticker: SQ) has been expanding its services, including for Bitcoin, stock trading, a debit card for mobile payment app Cash App, and the music service Tidal. It is also making headway in its Cash for Business segment, offering payments services to businesses and collecting a standard 2.75% fee on transactions.
“Square is creating a new business (joining Seller, Cash App, & Tidal) focused on building an open developer platform with the sole goal of making it easy to create non-custodial, permissionless, and decentralized financial services,” Dorsey said Thursday in a Twitter thread. Dorsey, who is also the founder and CEO of Twitter (TWTR) specified that the primary focus of the platform would be on Bitcoin.
Dorsey has been on the Bitcoin bandwagon for years now, announcing plans last week to develop a Bitcoin hardware wallet. Square has invested more than $470 million into Bitcoin and processed $3.5 billion in Bitcoin transactions during the first quarter on Cash App.
Decentralized finance, or DeFi, relies on blockchain technology rather than central financial institutions like banks to broker transactions, and has been hailed as a way to make financial transactions more efficient and low-cost. DeFi exchange numbers were up 70% in June, surpassing $1.5 billion in trading volume, according to CoinDesk. Adhering to crypto’s broader values of transparency and democratization, Dorsey emphasizes the platform will be “open roadmap, open development, and open source.”
Mizuho analyst Dan Dolev wrote that Cash App “may be en route to becoming the ultimate neo-bank and the money center bank of the future,” and says buying Square stock right now is “analogous to buying J.P. Morgan in 1871.”
Shares were up 1.2% to $238.20 on Friday afternoon, while the S&P 500 index is down 0.4%. Square stock is up 9% so far this year.
Dolev, a longtime bull on Square’s stock, wrote that there was a “clear path” for Cash App to increase its average revenue per user (ARPU) three to five times, to $150-$200 from $40-$50, by adding products ranging from tax services to home equity lending. In doing so, Cash App and Square can dramatically expand their user base, as they’ve tapped into less than 10% of their potential user base so far.
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