Square’s Balance Sheet: Fortune

The downfall of payments processing company Square shouldn’t be news to anyone who is deeply entrenched in the industry.

The company’s balance sheet was always mysterious to those that understand the business behind transactions; But Fortune, this week, got its hands on some interesting information:

Some earlier reports suggest Square loses money on every transaction in its core payments business. But internal e-mails show that gross margins on transactions — the amount of profit left after paying card processors, payment networks and other intermediaries — are a relatively healthy 34%. On a $100 transaction, the company takes a cut of about $3, which it records as revenue and from which it earns about $1 in gross profit. According to the internal e-mails, company is processing about $30 billion in transactions annually, which would put its gross profit at an annual rate of about $300 million. (These figures exclude the transactions Square handles on behalf of Starbucks; more on that below.)

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