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Leveling the Playing Field

With the launch of its Square Reader, Square gave small businesses an easy way to process credit card payments and manage their business. Now its Cash App gives young and low-income individuals a simplified way to spend, save, invest, send money, and access credit.

July 2020

Square’s mission and the success of its products are fundamentally about enabling underserved populations to access the financial system. In doing so, it has become a champion for small businesses and young and low-income individuals through its now ubiquitous mobile merchant services device and its newer Cash App.

With the launch of its Square Reader, Square made it possible for anyone to accept card payments using a smartphone or tablet. Today, sellers use Square to reach buyers online and in person, manage their businesses, and access financing. And individuals use Cash App to spend, send, store, and invest money.

Square’s sustainability goals focus on “hyperlocal” community outreach, the small business community, and the next generation of technology. To formalize the framework, Square formed a Social Responsibility Committee in 2018, which issued its first report in 2019. The committee presents itself as a learning resource for underserved communities by connecting local governments, small business groups, trade associations, and mentoring groups.

Square’s educational and training programs are geared toward small businesses with limited access to technology and/or those facing some knowledge gaps or language barriers to the financial system. Working with the U.S. Small Business Administration’s SCORE mentoring program, community development financial institutions, and the U.S. Chamber of Commerce, Square participates in workshops for small sellers on such topics as access to capital, ecommerce, and cash flow management.

In addition to providing merchant transaction processing, mobile payment, and other point-of-sale solutions, Square, through its Square Capital unit, has been moving into the small business lending arena with loan sizes averaging under $10,000. Loan repayment is facilitated seamlessly through the merchant transaction flow of the borrower. During the coronavirus pandemic, Square has helped small businesses by offering loans under the U.S. federal government’s Paycheck Protection Program (PPP). When banks were overwhelmed by the surge of applications, nontraditional technology lenders, including Square, extended their services to fill the gap. The speed, scale, and differentiated borrower base of Square’s PPP program highlighted its unique ability to reach underserved populations.

As of a 2018 survey of its loan recipients, 56 percent of Square’s loans were extended to women-owned businesses, compared with 18 percent of traditional small business loans in the U.S. Similarly, Square Capital made 36 percent of its loans to minority-owned businesses versus 27 percent of loans by the Small Business Administration.

Square’s qualification process is based on payment and point-of-sale data, and customers use the funds to purchase equipment and inventory, hire employees, expand their retail footprint, and carry out other business activities. Loan repayment is automated as a fixed percentage of card transactions, and sellers typically complete repayment in an average of eight to nine months. In addition, sellers can in turn offer their customers Square Installments to pay for purchases over time in monthly installments; Square Installment purchases range between $250 and $10,000.

The Square Capital loans, originated by a Utah state-chartered FDIC member bank, are sold to institutional third-party investors. Thus, Square receives revenues from seller repayments as well as when loans are sold to investors. Square is exploring other products, models, and structures for Square Capital, and may develop referral partners and other channels to reach merchants that are not current Square sellers.

Square takes a similar approach to servicing its individual clients by offering the easy-to-use, accessible, and transparent Cash App. This app has become a meaningful portion of Square’s business and future growth potential, with some 30 million users, who skew toward young and low income. The app could have an even greater societal impact than Square’s work with small businesses. Among other things, the Cash App offers fee-free deposit accounts with no minimum balance requirements, a debit card rewards program not tied to credit access or spending levels, and fractional-share stock investing.

By offering access to capital, Square seeks to help its seller customers expand their businesses and individuals gain access to savings and credit. Square benefits as transaction levels increase. The Square point-of-sale device is a metaphor for the company’s business model and its related sustainable development goals: it provides easy access to the financial system and facilitates entrepreneurial growth with training programs. Its practices help small businesses and individuals who see the company as an easy vehicle for business expansion, economic growth, and financial success.

Sustainable Development Goals

The Sands Capital six investment criteria tend to lead us to businesses that are innovators or vital facilitators of change in industries undergoing significant transformation. Many of these businesses operate in high-impact spaces such as technology and life sciences.

Square is one of many portfolio businesses that create impact by addressing at least one major social and environmental challenge identified by the United Nations Sustainable Development Goals (SDGs). Square addresses SDG 4: Quality Education; SDG 8: Decent Work and Economic Growth; SDG 10: Reduced Inequalities; and SDG 11: Sustainable Cities and Communities.


The business profiled was selected based on its reported alignment with one or more U.N. Sustainable Development Goals.

The views expressed are the opinion of Sands Capital Management and are not intended as a forecast, a guarantee of future results, investment recommendations, or an offer to buy or sell any securities. The views expressed were current as of the date indicated and are subject to change. Past performance is not indicative of future results. A company’s fundamentals or earnings growth is no guarantee that its share price will increase. Forward earnings projections are not predictors of stock price or investment performance, and do not represent past performance. The specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. There is no assurance that any security will continue to be owned by Sands Capital Management. You should not assume that any investment is or will be profitable. All company logos and website images are used for illustrative purposes only and were obtained directly from the company websites. Company logos and website images are trademarks or registered trademarks of their respective owners and use of a logo does not imply any connection between Sands Capital and the company. GIPS®-compliant presentations and additional disclosures for the related composites may be found at Sands Capital Annual Disclosure Presentation.

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