Square turns in impressive Q1, closes Tidal acquisition

Square’s gross payment volume (GPV) rose 29% year-over-year (YoY) in Q1, hitting $33.1 billion, per its shareholder letter. In the same period last year, Square’s GPV grew 14% YoY. Ninety percent of Square’s total GPV in Q1 2021 originated from its seller ecosystem—down from 96% in Q1 2020. The remaining 10% of Square’s total GPV in Q1 2021 stemmed from Cash App Business GPV, which skyrocketed 227% YoY.

Increased ecosystem engagement, higher transaction inflows, and volume from larger sellers drove Square’s performance in Q1.

• Square launched a number of Cash App initiatives that helped augment engagement. On the company’s Q1 earnings call, CEO Jack Dorsey said monthly active Cash App users made an average of 18 transactions across the ecosystem, with activity peaking in March. New initiatives like Bitcoin rewards on Cash Card purchases and the integration of Square Loyalty—Square’s point-of-sale rewards program—into Cash App most likely led users to open the app more often.
• Cash App users drummed up higher transaction inflows. Dorsey also noted that Cash App inflows in March increased 55% month-over-month. After the third round of stimulus payments started going out that month, more consumers likely used Cash App’s stimulus payment program—which let users receive their stimulus payments via direct deposit through Cash App—resulting in higher transaction inflows.
• And large sellers propelled volume growth in the period. GPV from Square’s mid-market sellers—those that generate more than $500,000 in annualized GPV—surged 43% YoY, more than double the growth of total seller GPV. This cohort made up 30% of total sellers, up 4 percentage points from Q1 2020. In the past, Square noted its ambitions to bring larger sellers into its ecosystem, and results from Q1 show that they’ve paid off.

Square’s recent Tidal acquisition can keep the company on its growth wave past Q1 by creating unique payment opportunities. Dorsey confirmed the closing of the deal, which gave Square majority stake in the music-streaming platform that was previously owned by music mogul Jay-Z, who has now joined Square’s board of directors. Dorsey added that the acquisition will “provide an opportunity to help drive engagement around a lot of tools that you might find in [Square’s] seller base and a lot of experience you would find in Cash App.” Though it remains to be seen how exactly Square will leverage Tidal, the platform can open up new revenue-generating opportunities for the payments giant that should benefit Cash App and other parts of Square’s ecosystem. For example, Square could integrate its ecommerce capabilities into the music platform so it can collect payments from the service.