Square reported its third quarter 2016 earnings this week, and it’s not a particular surprise that the company exceeded all expectations: for the third consecutive quarter Square surpassed its expected metrics with a GPV of $13.2 billion, up 39% year over year.
As was the case last quarter, CEO Jack Dorsey attributed much of the growth to the strong development of sellers who joined the network.
Said Dorsey on the company’s earnings call:
Many sellers have grown since joining Square. Additionally larger sellers appreciate the cohesiveness of our ecosystem and the simplicity we bring to payments technology. Features like the elegance and mobility of our hardware to the flexibility of our platform.
Sellers on the Square network have a couple of distinct advantages over competitors, including the ability to receive loans from the company’s still young lending arm, Square Capital, which according to Square’s Q3 call has provided more than $1 billion in loans to its small business owners.
That’s the same number PayPal reached last year — for some industry context on the speed of the program’s own growth.
Square Capital proactively offers loans to sellers based on their potential for growth — the lending arm has been in operation for just about two years, and was also responsible for the favorable results the company saw in Q2. This is a bit of different model than PayPal, as Square Capital is not yet accepting applications from its sellers for loans, but rather offers them out to selected recipients.
Square Capital is somewhat uniquely qualified to lend to its sellers, as it has full access to the data of those companies, and as we know, data is fast becoming an industry all on it’s own, and one more and more important for fintechs.
“We’re seeing a shift [with data] from a kind of checks and balances role to more of a foundational role,” says Hicham Oudghiri, CEO of operational data management and intelligence company Enigma, which works with financial institutions to solve issues through data insight.
Oudghiri also pointed out to Bank Innovation that this partnership between data and technology is crucial if businesses really want to leverage “what the technology can do;” something Square seems to be doing quite well given the business model of Square Capital.
In other earnings news, Q3 2016 has been a strong quarter all around for many financial service companies including traditional banks like Bank of America, Citigroup, and JP Morgan Chase, the last of which also reported recent earnings that far bypassed estimates.
JP Morgan saw solid results in loan growth which climbed 10% year over year, outpacing peer banks like Wells Fargo (which actually did quite well taking into account the Never Ending Saga of Scandal), though Capital One is still the bank to watch in that category.
JP Morgan also reported strong results with cards, building $200 million of reserve in Q3, which might be a surprise to some who have been watching card growth slowly decline over the past couple of years. The number of debit cards issued globally is actually growing faster and faster especially in Africa and Asia, a rise directly correlated to the growth of the banked population in those regions according to a new study conducted by consulting firm RBR.
“Worldwide the number of credit cards continues to grow but at a slower rate than debit cards. The lower growth in credit card numbers is due mainly to regulations and economic factors,” says RBR Senior Associate Chris Herbert of the study’s results, adding, “I would not expect to see cards disappear anytime soon.”
However JP Morgan is continuing to move forward with its other payment options such as Chase Pay, which will roll out for selected merchants at some point next year, and will also be integrated with Walmart’s own mobile payment solution, Walmart Pay.