Here’s Why Square’s Free Stock Trading News Is a Big Deal

Square (NYSE:SQ) recently announced on Twitter its plans to roll out commission-free stock trading through its person-to-person payment app, Cash App. This pits the San Francisco-based company squarely in competition with the granddaddy of free stock trading, Robinhood, in addition to all the other brokers recently introducing free trades. Square and Robinhood both target younger users, but unlike Robinhood, the Cash App plans to allow fractional stock sales, so investing $1 in a stock that sells for $300 a share is an option. 

But the offering is more than just another nifty feature. Square is working to shed its historical image of serving businesses and gain broader appeal. Square is targeting those who are new to investing and this is a smart move. One study shows three out of five millennials lack exposure to the stock market, leaving a large market for Square’s novice-friendly approach.

Offsetting declining growth rates

Should the new stock trading offering succeed and bring more folks to the Cash App — which had 15 million users at the end of 2018 and “has continued to grow since then,” according to the company — it might offset declining growth in the amount of payments flowing through Square’s platform.

Whereas Q2 2018 recorded 30% YoY growth in payments processed, that number has steadily declined by about one percentage point each quarter thereafter. For the second quarter this fiscal year, the company clocked a 25% YoY growth rate, with $26.8 billion moved through its processors.

Although its payment volume growth sank, there was good news. In Q2 this year, the company nearly turned a profit by clocking in a net loss of only $7 million, a significant improvement from double-digit losses in the prior two quarters. Additionally, EBITDA registered at $105 million,…

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