Square announces Square Installments to let small businesses offer monthly payment plans to their customers
Context & Ripple Effects
Installments is the next rung on a ladder Square has been climbing since it pivoted to small businesses with instant deposits and dispute protection in 2015, then built a lending arm — Square Capital — that was advancing over $500M within 18 months. By 2016 it had even opened that lending to merchants outside the Square network.
The move matters because it turns Square from a payment processor into a credit intermediary at the point of sale: monthly plans are typically where small merchants lose big-ticket sales to larger retailers with captive financing arms.
First-order effects
- Small businesses on Square can now offer customers monthly payment plans natively, without signing up a separate consumer-finance provider or bearing the underwriting themselves.
Second-order effects
- Rival point-of-sale and payments providers serving small merchants face pressure to match an integrated installments offering or cede big-ticket checkout volume; Square also gains another data stream to sharpen the underwriting behind Square Capital.
Third-order effects
- If the pattern holds, payments processors keep absorbing functions once owned by banks and specialty lenders — a trajectory the corpus already shows continuing with Square Card's instant access to sales funds in 2019 and short-term loan tests by 2020.
The trend: Payments processors are bundling credit, deposits, and financing into single small-business platforms, converting transaction relationships into full financial-services lock-in.