Why Square Stock Jumped and Fell Off Today

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.

Person using Cash App to pay on Square reader. g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/643086/cash-app-pay.png&w=1000&op=resize 1000w, g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/643086/cash-app-pay.png&w=2000&op=resize 2000w”/>

Image source: Square.

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.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium advisory service. Were motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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