Square Introduces Square Installments Option for Financing Purchases
FinTech firm Square announced this week that is was launching a new product that will make it easier for merchants to offer customers financing on large purchases. Dubbed Square Installments, the company says it’s hoping this new feature will help small businesses make more sales and allow them to better compete with larger businesses that may have already had financing options in place. Furthermore in a press release the company said, “Square Installments is seamless for sellers, taking just minutes to get started and has no sales volume minimums.”
According to Square, the launch of Installments comes following a survey that found 68% of consumers would be more likely to purchase from a small business if financing options were available. As a result the company has built the new offering to be as customer-friendly as possible. Somewhat similar to Affirm — another FinTech that offers in-store financing — shoppers can apply for Square Installment options online using their device and can choose repayment options with terms of 3, 6, or 12 months with APRs ranging from 0% to 24%. Square also promises that the total cost of financing will be disclosed up front. Currently Square Installments is available to Square sellers in 22 states and will be eligible for select purchases costing as little as $250 and as much as $10,000.
In a statement regarding the new Square Installments product, Square Capital head Jacqueline Reses said, “We’re focused on removing the complexity associated with financial products, enabling more businesses to access incredible tools that can help them grow. Square Installments delivers simple and quick financing to customers seeking greater flexibility as they make purchasing decisions.” Speaking to CNBC, Reses went on to note that the ability for customers to apply on their devices also offered greater privacy, saying “It’s not obvious when you’re applying …We would rather the customer be able to have a private experience on their own device — they’re not holding anyone up, it’s not embarrassing, and there’s no fear of giving information to someone they don’t know.”
While small business owners and consumers may be excited about Square’s latest venture, Wall Street seems to be a bit more pessimistic. The company’s stock has fallen from nearly $97 a share when the announcement of Square Installments was made to around $79 a share as of this writing. In a letter to clients (picked up by CNBC) BTIG analyst Mark Palmer wrote that, “The market appears to be overlooking any risks to the company’s business model, and credit risk in particular. Our bearish thesis on Square is predicated in part on our view that the company’s increasing dependence on the extension of credit to its customers to spur its growth has made its business model increasingly vulnerable to volatility in the credit markets.” Palmer also mentioned Affirm, noting that their APR range starts at 10% and goes up to 30%. He went on to say, “We believe this should raise questions about whether SQ will be sufficiently paid for the risk it will take on the program.”
Regardless of the worries that investors and observers may have about Square Installments, the feature does seem like a logical extension of Square’s brand. Not only does it fit nicely into the company’s efforts to equip small businesses with a greater set of tools but also speaks to their apparent goal of having a hand in nearly all aspects of the FinTech sector. Time will tell whether the risk Square is taking on with Installments will pay off or sink them but, for now, it definitely seems worth a shot.