How Square (Block) Makes Money: Transactions, Bitcoin, and Subscriptions
Block Inc. (SQ), formerly Square, is a financial services and online payments company that provides hardware and software tools to help businesses run and grow their operations.Among Block's primary products are—a point-of-sale hardware system, software for payments processing and analytics, Square Card (a free business debit card), and Cash App (a peer-to-peer (P2P) payment service).
Blockfaces a broad array of small and large competitors such as business software companies, payroll processors, payment terminal vendors, and banks. They include PayPal Holdings Inc. (PYPL), Intuit Inc. (INTU), and venture capital startup ShopKeep.
Since its 2015 initial public offering (IPO), Block has grown rapidly into one of the largest and best-known payment services companies in the U.S. But it only recently achieved profitability. Four years after going public, the company posted its first annual profit in fiscal year (FY) 2019.
Its FY 2020, which ended Dec. 31, 2020, has been another profitable year, albeit less so than FY 2019.Net income fell 43.2% to $213.1 million in FY 2020. Total revenue for the year was $9.5 billion, up 101.5% compared to the previous year. Gross profit rose 44.6% to $2.7 billion.
Bitcoin revenue, which grew 785.2% compared to the previous year, generated the majority, or 48%, of the company's total revenue.Block allows users to buy bitcoin through its Cash App, a service for which the company charges a small margin above the price it pays to purchase bitcoin. Bitcoin revenue will fluctuate depending on the volatility of bitcoin prices and customer demand.Transaction-based revenue comprised about 35% of total revenue,while subscription and services-based revenue and hardware revenue comprised 16% and 1% of
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