Why the Square share price jumped and fell off today

The company’s shares were up and down today after it made an announcement that potentially upends the credit card ecosystem.

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Woman paying using Square.

Image source: Square

What happened 

Shares of fintech stock Square (NYSE: SQ) were up as much as 2.7% in trading on Tuesday after the company announced a big integration between the Square App and Cash App. Shares are down 0.2% with a few minutes left in trading, although that was largely driven by the market overall falling from breakeven at the start of trading to just under 1% lower near the end of trading. 

So what

The announcement was that Square sellers will now be able to accept Cash App Pay both online and at their terminals. This opens up a new payment option for businesses and allows customers to access funds in their Cash App account. 

While adding a payment method may be a small move, it’s the underlying fees where Square will see the biggest impact. A majority of the approximate 2.9% fee that it charges sellers to perform credit or debit card transactions is paid to banks and credit card companies like Visa and Mastercard. Since the Cash App to Square integration doesn’t use those networks it’s Square that will keep the entire fee. 

Now what

The end goal for Square has long been a likely integration between the consumer Cash App and the business-focused Square App. This announcement does just that and it could be the start of Square’s disruption of the long engrained credit card companies. I’m very bullish on this announcement and Square’s ecosystem in general, and think the small bounce today should have been much bigger, even if investors could have seen the move coming a mile away. 

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Travis Hoium owns shares of Square. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Square. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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