Square tracks merchants’ transaction history through its services in order to better determine their eligibility for loans through Square Capital. There are certainly a lot of requirements around the analytics part of the service — Square has to do a detailed risk analysis for each customer and determine at what rate they are going to be paying back their loans.
So it makes sense that the team would naturally be attractive to Square for its Square Capital product. The better a tool like Square Capital operates, the more attractive it is to merchants over traditional tools. And if Square Capital becomes a go-to for small businesses, they’ll be more likely to use other Square products — helping Square continue to grow its business across the board.
Square is not acquiring Framed Data’s technology as part of the arrangement. The Framed Data product will be shut down at the end of the month.
Prior to being acquired, Framed Data served as an analytics engine that helped its customers understand user behavior. It would basically look at what users are doing and then make predictions — such as how many interactions are required in an app before a user makes their first in-app purchase. Framed Data previously raised $2 million in seed financing.
Square Capital is still an increasingly important point of reference for the company, such as its callouts in its most recent earnings reports. The company said it extended $400 million through more than 70,000 advances last year, with $150 million of that coming in the fourth quarter.
Square has been on a bit of a run lately, most-recently beating its revenue expectations for the fourth quarter and seeing its stock price rise more than 30% in the past month. That performance has sent Square’s share prices well back above their initial public offering price. Earlier this month, Square launched in Australia, its first country expansion in three years.
If Square is going to continue growing, it’s going to have to develop a portfolio of products beyond its point-of-sale business, and that includes Square Capital. It also has other products like Square Cash, which can now hold a balance similar to Venmo, and its food delivery service Caviar. Square isn’t just beholden to private investors any more, and has to convince the public markets that it is a business worth its previous valuation of $6 billion before going public — and improving its core products is a good start to doing that.