Most of those losses are because Square subsidizes the actual cost of credit card processing (i.e. charges stores less than what Visa charges). There are a bunch of ways to mitigate this:
- the termination of the Starbucks agreement in 2016 (this already saves $27 million/year based on the 2014 numbers)
- raising flat-rate processing fees for businesses in the future
- reduce the cost of transactions by adding more fraud-prevention measures that make credit card processors happy (e.g. Chip and PIN)
- create a new business that allows Square to cut out the credit card networks by owning both sides of the transaction
- create a new business using the information from being in the credit card processing flow that is profitable enough to subsidize the credit card processing
Right now, I suspect they're trying to "pull an Amazon" -- they're operating at a loss, but they hope investors will like the brand and the vision enough that they'll put money in anyway.
- the termination of the Starbucks agreement in 2016 (this already saves $27 million/year based on the 2014 numbers)
- raising flat-rate processing fees for businesses in the future
- reduce the cost of transactions by adding more fraud-prevention measures that make credit card processors happy (e.g. Chip and PIN)
- create a new business that allows Square to cut out the credit card networks by owning both sides of the transaction
- create a new business using the information from being in the credit card processing flow that is profitable enough to subsidize the credit card processing
Right now, I suspect they're trying to "pull an Amazon" -- they're operating at a loss, but they hope investors will like the brand and the vision enough that they'll put money in anyway.