Will rumoured Apple solution be trouble for Square?

Block’s [SQ] Square has seen tremendous growth in the adoption of its point-of-sale systems in the last two years. In part out of necessity, given the demand for contactless payment, but nonetheless, it took advantage.

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Unfortunately, it looks like Big Tech might be coming to spoil the party.

iPhones could become payment terminals

Apple [AAPL] is rumored to be working on its very own point-of-sale solution — small businesses could use their smartphones to take payment — completely hardware-free.

If Apple were to enter the space, it could challenge Square’s solutions in two big ways. 

  • New Apple customers wouldn’t have to spend $300 to install a terminal. 
  • Apple has one billion iOS users already, billions of iPhone users worldwide, and has an active digital wallets division with Apple Pay. This is just the next step to monetize sellers, and leapfrog players like Square by dumping the clunky tech.

Block has long lived off the razor and blade model. It sells businesses the hardware at a little markup, and then it’s in your store, hopefully permanently. Once it’s in, it starts making the recurring revenue from the real profit machine — software services and transactional revenue. While this model gives Block some protection with customers already set up on its network, if Apple can provide the same service without all the extras, it sinks Block’s value proposition.

Transactional-based revenue from point-of-sale still makes up a huge percentage of Block’s revenue, so if it came under pressure, it could devastate the business. Apple has continuously entered new industries and taken what it wants. It bulldozed Nokia in phones, Fitbit in smartwatches. Square’s turn might be coming next.

I guess there’s always crypto to fall back on.


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